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Medical devices major, St. Jude Medical Inc. (STJ - Analyst Report) released preliminary results for the 2012-fourth quarter. The company will report its financial results on Jan 23, before markets opens.

St. Jude expects adjusted earnings for the quarter in the range of 90 cents—92 cents per share, surpassing its earlier guidance of 86 cents–88 cents. This compared with the Zacks Consensus Estimate of 89 cents for the quarter.

Adjusted earnings exclude one-time item charges of 50 cents–60 cents per share related to restructuring and other corporate activities. Management stated that sales growth and cost reduction measures will lead to the improvement in earnings.

Revenues

Total revenues for the quarter, on a constant currency basis, are projected to be $1,372 million, down 1% year over year. The Zacks Consensus Estimate for revenues is $1,370 million.

Segment Review

Based on the above projections, revenues from the core Cardiac Rhythm Management (CRM) business declined 6% (5% on a constant currency basis) to $682 million. Within CRM, Implantable cardiac defibrillators (ICD) revenues were down 3% at $422 million. This segment continues to be plagued by the Durata lead issues. Pacemaker revenues declined 11% to roughly $260 million.

Neuromodulation revenues decreased 7%, (down 6% in constant currency) year over year to $113 million. Revenues from St. Jude’s Cardiovascular segment inched down 1% (up 1% in constant currency) to $338 million. Within Cardiovascular segment, structural heart devices revenues increased 1% to $152 million but the same from vascular offerings dipped 2% to $186 million. However, on a positive note, Atrial Fibrillation (AF) revenues climbed 10% (up 11% in constant currency) to $239 million in the quarter.

About the company

St. Jude, with a market cap of $11.80 billion, is a leading medical devices manufacturer maintaining a solid rate of growth over the past decade. We are impressed by the company’s efforts in leveraging its margins by undertaking various restructuring initiatives and controlling expenses.

However, St. Jude’s ICD business is facing operational headwinds concerning the Durata leads, which is affecting its top-line growth. This might lead its competitors in the CRM space such as Medtronic Inc. (MDT - Analyst Report) and Boston Scientific Corporation (BSX - Analyst Report) gain market share.

St. Jude currently carries a Zacks Rank #3 (Hold), which complements our Neutral recommendation on the stock for the long term.
 

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