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St. Jude Medical Inc. (STJ - Analyst Report) is set to report its fourth-quarter 2012 results before the opening bell on Wednesday, Jan 23. Let’s see how things are shaping up prior to the announcement.

In the last quarter, the medical device major posted a 2.47% positive earnings surprise on the back of improved cost control measures and strategic realignment initiatives to reduce operating expenses.

Factors to Consider this Quarter

In the preliminary results for the fourth quarter, management stated that sales growth and cost reduction measures will lead to improvement in earnings. New growth drivers such as an innovative product line along with restructuring efforts to streamline the underlying business will likely be accretive in the future.

While the company’s business fundamentals remain strong, we remain concerned regarding uncertainty prevailing at the company’s core implantable cardiac defibrillators (ICD) business. The division has recently received a warning letter from the Food and Drug Administration (FDA) regarding manufacturing and quality systems-related problems at its Sylmar facility which manufactures the highly controversial Riata ST Optim and Durata leads.

Earnings Whispers?

Our proven model does not conclusively show that St. Jude is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP (Expected Surprise Prediction) (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.

Zacks Earnings ESP:  The Most Accurate estimate stands at $0.90, while the Zacks Consensus Estimate is also pegged at $0.90. This comes to a difference of 0.00%.

Zacks #3 Rank (Hold). St. Jude’s Zacks Rank #3 (Hold) lowers the predictive power of ESP. The Zacks Rank #3 together with 0.00% earnings ESP makes surprise prediction difficult.

Other Stocks to Consider

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

NuVasive Inc. (NUVA - Snapshot Report), Earnings ESP of 72.73% and Zacks Rank #1 (Strong Buy)

Hill-Rom Holdings, Inc. (HRC - Snapshot Report), Earnings ESP of 2.27% and Zacks Rank #2 (Buy)

Becton, Dickinson and Company (BDX - Analyst Report), Earnings ESP of 3.35%and Zacks Rank #2 (Buy)

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