Back to top

Analyst Blog

This page is temporarily not available.  Please check later as it should be available shortly. If you have any questions, please email customer support at support@zacks.com or call 800-767-3771 ext.  9339.

Medical devices giant St. Jude Medical, Inc.’s (STJ - Analyst Report) recently announced that it will be offering 3.25% senior notes due 2023 for an aggregate purchase price of $900 million, and also 4.75% senior notes due 2043 for an aggregate purchase price of $700 million.

The net proceeds will be used primarily to redeem its earlier debts via the 3.75% senior notes due 2014, of which $700 million is outstanding, as well as the 4.875% senior notes due 2019, of which $500 million is outstanding. The company may also use the proceeds for general corporate purposes, including repayment of short-term loans.

St. Jude’s debt-to-capital ratio at the end of the fourth quarter of 2012 was 38.4%. Following the completion of the offerings, the new ratio will be 50.3%. Moreover, net interest expenses in 2012 were $73 million. The current favorable interest rate environment should help the company lower interest expenses going forward.

Given St. Jude’s strong cash balance, we believe that the company will be able to meet its interest obligation. The company exited the 2012-fourth quarter with cash and cash equivalents of $1,194 million, up 21.1% from the previous-year quarter. Long-term debt decreased 6% year over year to $2,550 million. Additionally, STJ generated $1,335 million of operating cash flow in 2012, up 3.7 year over year.

St. Jude has a Zacks Rank #3 (Hold). The company’s fourth-quarter adjusted earnings per share of 92 cents rose 7% from the prior year and topped the Zacks Consensus Estimate by 2 cents.

The company’s strong business fundamentals coupled with new products are expected to drive long-term growth. However, softness in the core Cardiac Rhythm Management (“CRM”) market and the noise surrounding its high-margin ICD leads are likely to keep revenues under pressure.

While we remain on the sidelines regarding St. Jude, medical products companies such as Covidien (COV - Analyst Report), Abaxis (ABAX - Analyst Report) and CareFusion (CFN - Analyst Report) appear impressive. All these stocks carry a Zacks Rank #2 (Buy).

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

Learn more

Start for as little as $4.50 per trade.

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
LAKE SHORE G LSG 0.77 +6.05%
QUESTCOR PHA QCOR 80.07 +2.47%
VIPSHOP HOLD VIPS 156.35 +1.82%
ENLINK MIDST ENLC 36.29 +1.60%
BNC BANCORP BNCN 17.33 +1.58%