St. Jude Medical Handily Beats Analyst Estimates For Q2, Especially in ICDs

St. Jude Medical roundly beat analyst estimates on almost all major product lines in the second quarter, including its ICD business where it came out ahead of its own expectations, according to earnings results announced Wednesday. 

Still, the Minnesota medical device company saw revenue decline slightly to $1.40 billion in the quarter ended June 29, from $1.41 billion in the same period a year ago. Profits declined to $107 million, or 40 cents per diluted share in the second quarter, from $244 million, or 78 cents per diluted share.

Analysts, who ignore foreign currency fluctuations and other one-time expenses that affect a company's performance focus on constant currency and operating results. Using that measure, St. Jude showed revenue growth of 2% in the second quarter from the same period in 2012, with its earnings per share at 96 cents, up from 88 cents in the second quarter of last year. Analysts had expected EPS to be $94 cents and revenue to be $40 million less than what St. Jude garnered, excluding charges and currency dips.

Of note in the second quarter, was the company's performance in its cardiac rhythm business, which includes St. Jude's ICD business. The ICD market worldwide has been under stress, especially in the U.S., but in the second quarter St. Jude's ICD business in the U.S. had revenue of $270 million, up $3 million from what it garnered in the second quarter of 2012. In its overall CRM business, the company's revenue fell 4% to $718 million, down from $746 million, a 4% decline. The decline was only 2% excluding currency fluctuations.

"We think our CRM franchise has turned the corner during the second quarter and is returning to normalcy after the pressures of the last two years," said Daniel Starks, CEO of St. Jude Medical, in prepared remarks on the earnings conference call. 

He added that the company has seen increase in usage of the company's ICDs and has been heartened by "the stability of ASP (average selling price) pressure at a mid-single digit rate" in the second quarter

Later in responding to a question to an analyst's question, Starks said that he would have to wait to see how other companies performed in the second quarter to know definitively whether the company has gained share in the CRM market or the overall market has become stronger.

Two analysts - Glenn Novarro with RBC Capital Markets and Danielle Antalffy of Leerink Swann - described St. Jude's second-quarter performance as "solid."

In a research note to investors, Antalffy said:

Durata is the St. Jude's controversial ICD lead that many believe is similar in design to the Riata family of leads that were recalled.

The company has introduced seven new CRM products this year and expects to launch one more. CEO Starks noted that many of these products have barely begun to have an impact on revenue, implying that the company's CRM business would only get stronger in the coming months.

Here is how St. Jude performed in other businesses:

In the third quarter of the year, St. Jude Medical expects to earn EPS of 88-90 cents while full-year EPS is expected to be $3.70-$3.73.

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-- By Arundhati Parmar, Senior Editor, MD+DI