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On Sep 17, Zacks Investment Research raised St. Jude Medical Inc. (STJ - Analyst Report) to a Zacks Rank #2 (Buy).

Why the Upgrade?

The recent flurry of activities such as the CE Mark approval of the second generation of EnligHTN, acquisition of Endosense, and U.S. Food and Drug Administration (FDA) approval for Mediguide-enabled ablation catheters, as well as the FDA’s decision to review CardioMEMS’ Champion offering have managed to boost investors’ confidence for St. Jude. Moreover, this medical device giant has been witnessing rising estimates on the back of strong second-quarter results and raised guidance for 2013.

On an encouraging note, the company’s Cardiovascular division received a significant boost on Aug 29, with the CE Mark approval for its next-generation EnligHTN Renal Denervation System. With only 4% penetration rate, the device has a huge market opportunity worth roughly $30 billion.

Additionally, on Sep 6, an FDA committee announced that it will discuss information related to the pre-market approval application next month for privately-held cardiac devices company CardioMEMS’ Champion Hear Failure (HF) Monitoring device. St. Jude has a 19% stake in the company and has agreed to acquire it on successful completion of a significant milestone.

The second round of review by the FDA advisory committee should yield positive results, given the initial failure of the Champion device to win regulatory approval in 2011.

On Aug 19, the company’s AF division acquired Switzerland-based Endosense to expand its product base in both the international and U.S. markets. Endosense is the first to develop a force-sensing technology — TactiCath ablation catheter — to measure the amount of force applied to the heart wall during a catheter ablation procedure.

Further on, the AF division received the U.S. Food and Drug Administration (FDA) approval for its latest MediGuide Enabled Ablation Catheters. St. Jude considers the MediGuide technology to be the most important growth driver for its AF products portfolio.

St. Jude’s second-quarter adjusted earnings per share of 96 cents beat the Zacks Consensus Estimate of 94 cents, and transcended the year-ago earnings by 9.1%. Revenues grew 2% in constant currency to $1,403 million, comfortably exceeding the Zacks Consensus Estimate of $1,364 million. Based on its progress, STJ raised the bottom end of its adjusted earnings for 2013 to $3.70–$3.73 from the earlier band of $3.68–$3.73.

The Zacks Consensus Estimate for 2013 increased 0.3% to $3.73 per share over the last 60 days. The Estimate for 2014 also increased 0.3% to $3.97 over the same period.   

Other Stocks to Consider

Other medical stocks worth considering are Alere (ALR - Snapshot Report), with a Zacks Rank #1 (Strong Buy), and Exactech (EXAC - Snapshot Report) and Boston Scientific (BSX - Analyst Report), both carrying a Zacks Rank #2 (Buy).

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