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St. Jude Medical Inc. (STJ - Analyst Report) is set to report its second-quarter 2013 results before the opening bell on Wednesday, Jul 17. Let's see how things are shaping up prior to the announcement.

In the last reported quarter, the medical device major posted break-even earnings surprise. An improved operating margin on the back of the company’s restructuring efforts to streamline the underlying business helped offset declining organic revenue growth.

Factors to Consider This Quarter

We are primarily concerned about St. Jude’s declining top line. The core Cardiac Rhythm Management (CRM) division continues to face multiple headwinds. A still choppy U.S. defibrillator market remains an overhang on St. Jude, as reflected by sustained implant volume pressure. Additionally, we remain cautious about increased competition, pricing pressure, softness in cardiovascular sales along with currency fluctuations.  

Meanwhile, we expect growth in international revenues to boost overall sales of the company. New growth drivers such as an innovative product line along with restructuring efforts to streamline the underlying business will likely be accretive for STJ in the long term. The company has received a number of regulatory approvals for its latest offerings as well as initiated a number of clinical trials in the second quarter, which is encouraging.

Earnings Whispers?

Our proven model does not conclusively show that St. Jude is likely to beat earnings estimate this quarter. That is because a stock needs to have both a positive Earnings ESP (Read: Zacks Earnings ESP: A Better Method) and a Zacks Rank of #1, 2 or 3 for this to happen. This is not the case here, as you will see below.

Negative Zacks Earnings ESP:  The Most Accurate Estimate stands at 93 cents, while the Zacks Consensus Estimate is pegged at 94 cents. This comes to a difference of -1.06%.

Zacks Rank #4 (Sell): St. Jude’s Zacks Rank #4 (Sell) lowers the predictive power of ESP. The Zacks Rank #4 together with -1.06% earnings ESP makes surprise prediction difficult.

Other Stocks to Consider

Here are some other companies from the medical sector you may want to consider as our model shows they have the right ingredients to post an earnings beat this quarter:

  • Sarepta Therapeutics, Inc. (SRPT - Snapshot Report), Earnings ESP of +27.78% and a Zacks Rank #1 (Strong Buy)
  • Zimmer Holdings, Inc. (ZMH - Analyst Report), Earnings ESP of +0.69% and a Zacks Rank #3 (Hold)
  • CR Bard Inc. (BCR - Analyst Report), Earnings ESP of +0.73% and a Zacks Rank #3 (Hold)

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