St. Jude Medical Inc (STJ) reported adjusted earnings of 97 cents in third-quarter 2015, in line with the Zacks Consensus Estimate. However, earnings decreased almost 5% year over year, primarily owing to a 2.4% decline in total sales to $1.34 billion, which also lagged the Zacks Consensus Estimate of $1.35 billion.
At constant currency (cc), earnings increased 12% year over year to $1.14 per share. Total sales also increased 6% on a year-over-year basis.
In the reported quarter, international sales declined 10% (up 6% at cc) to $634 million, while U.S. sales grew 6% to $705 million.
St. Jude recently completed the acquisition of HeartMate developer Thoratec, which generated $124 million in sales during the quarter.
Segment Results
Cardiac Rhythm Management (CRM) sales decreased 8% (down 1% at cc) year over year to $630 million. U.S. sales declined 5% to $353 million while international sales plunged 12% to $277 million (up 4% at cc) in the reported quarter.
At the CRM division, implantable cardiac defibrillator (ICD) sales declined 7% (down 1% at cc) to $392 million, while pacemaker sales fell 10% (down 1% at cc) to $238 million. CardioMEMS HF systems sales were approximately $20 million in the quarter.
Atrial Fibrillation (AF) sales increased 7% year over year (up 17% at cc) to $271 million. International sales declined 4% to $148 million (up 12% at cc), while U.S. sales surged 25% to $123 million in the quarter.
Cardiovascular sales declined 2% (up 7% at cc) to $317 million in the quarter. International sales plunged 13% to $178 million (up 2% at cc), while U.S. sales soared 17% to $139 million.
At the Cardiovascular division, vascular product revenues climbed 4% (up 14% at cc) to $176 million. Meanwhile, structural heart product revenues decreased 9% (up 1% at cc) to $141 million in the quarter.
Neuromodulation sales jumped 13% year over year (up 19% at cc) to $121 million, driven by a 19% surge in U.S. sales. Meanwhile, international sales declined 4% on a year-over-year basis (up 17% at cc).
Guidance
For the fourth quarter of 2015, St. Jude expects sales growth in the range of 7% to 8%, at cc. Foreign exchange volatility is expected to impact sales by approximately $75 million to $85 million. Earnings for the fourth quarter are projected in the range of $1.00 to $1.02.
For 2015, St. Jude expects sales growth of 6%, at cc. Foreign exchange volatility is expected to hurt sales by approximately $397 million to $407 million. Adjusted earnings are projected in the range of $3.93 to $3.95 (down from $3.96 to $4.00) per share.
Our Take
St. Jude’s results reflect strong momentum at the company’s CardioMEMS technology, Atrial Fibrillation and Neuromodulation businesses. Moreover, the addition of Thoratec’s product line to St. Jude’s expanding product portfolio is a significant positive in our view.
However, we feel that the strong U.S. dollar which is impacting the company’s revenues will continue to hurt its bottom line. Moreover, the prevailing tight spending environment remains a major headwind.
Zacks Rank & Other Key Picks
Currently, St. Jude has a Zacks Rank #2 (Buy).
Other favorably ranked stocks in the same sector are NuVasive NUVA, Baxter International BAX and SurModics SRDX. All three companies sport a Zacks Rank #1 (Strong Buy).
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