Bloomberg News

St. Jude Narrows Full-Year Earnings Forecast on Cost Cutting

October 19, 2011

(Updates with closing stock price in seventh paragraph.)

Oct. 19 (Bloomberg) -- St. Jude Medical Inc., maker of devices to treat irregular heartbeats, narrowed its full-year profit forecast to take into account currency fluctuations and the pending approval of its latest defibrillator lead.

St. Jude expects 2011 earnings excluding one-time items of $3.26 a share to $3.28 a share, compared with an earlier target of $3.25 to $3.30, the St. Paul, Minnesota-based company said in a statement. Third-quarter net income rose 8.7 percent on products to treat pain and cardiovascular disease, while sales of pacemakers and defibrillators gained 2 percent even as the market contracted.

St. Jude’s forecast brackets the analyst consensus of $3.27 a share and suggests 8 percent to 9 percent annual growth, said Michael Weinstein, an analyst at JPMorgan Chase & Co., in a note to clients today. The company is still waiting for U.S. regulatory approval of its quadripolar cardiac-resynchronization therapy lead, known as Quadra, which management has said it expected early in the fourth quarter.

While the forecast “implies a lower fourth-quarter earnings per share number than the Street had previously been modeling, $0.83 to $0.85 versus $0.86, we expect this to be seen as acceptable to investors in light of what’s played out in the ICD market in 2011 and the ongoing delay to Quadra,” Weinstein wrote. The market for implantable cardioverter defibrillators, or ICDs, plunged in the past year amid a U.S. Justice Department investigation and questions of overuse.

Profit Rises

Net income climbed to $226.5 million, or 69 cents a share, in the third quarter, from $208.4 million, or 63 cents, a year earlier. Earnings excluding some items were 78 cents, exceeding the average estimate of 76 cents in a Bloomberg survey of 25 analysts.

St. Jude gained 4.3 percent to $38.95 at the close in New York. The stock has fallen 2 percent in the past 12 months.

Third-quarter revenue rose 12 percent to $1.38 billion, meeting analysts’ estimates. Worldwide sales of defibrillators used to shock a stopped heart back into a normal rhythm gained 1 percent to $445 million.

The company’s Quadra lead transmits an electrical current to four different locations, instead of the traditional two. The technology is designed to give doctors more options for delivering treatment without a second operation to reposition the wire, allowing them to bypass areas compromised by scar tissue or that may trigger unwanted side effects.

‘Stable’ Market

“St. Jude reported results that modestly beat consensus, but lowered its full year guidance due to currency movements and the delayed FDA approval of Unify Quadra/Quartet,” wrote Michael Matson, a senior analyst at Mizuho Securities USA Inc. in New York, in a note to investors. “Despite investor fears, St. Jude’s results and management commentary indicate a stable cardiac rhythm management market in the third-quarter 2011, which we view as a positive for its peers.”

Rivals Boston Scientific Corp., based in Natick, Massachusetts, reports third-quarter earnings tomorrow, while Medtronic Inc., based in Minneapolis, will report Nov. 23.

--Editor: Andrew Pollack, Bruce Rule

To contact the reporter on this story: Michelle Fay Cortez in Minneapolis at mcortez@bloomberg.net

To contact the editor responsible for this story: Reg Gale at Rgale5@bloomberg.net


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