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St. Jude Upgraded to Buy

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On Aug 28, Zacks Investment Research upgraded St. Jude Medical to a Zacks Rank #2 (Buy).

Why the Upgrade?

St. Jude has been witnessing rising estimates on the back of strong second-quarter results and raised guidance for 2013. Moreover, the company’s growing Atrial Fibrillation (AF) products portfolio witnessed a major boost with the acquisition of Endosense and regulatory approval for its Mediguide catheters. The company delivered positive earnings surprises in the last 3 out 4 quarters with an average beat of 2.27%. The long-term expected earnings growth rate for this stock is 8.2%.

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 the year to the band of $3.70–$3.73 from the earlier band of $3.68–$3.73. Following the announcement of the second quarter results on Jul 17, share price increased 11.9% to $50.45 on Aug 27. Moreover, the company’s share price surged 39.4% on a year-to-date basis.

Moving ahead, in Aug 2013, the company’s 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 under its Cardiovascular and Ablation Technologies Division (CATD).

Further, the AF division acquired Geneva, 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.

The Zacks Consensus Estimate for 2013 increased 0.8% to $3.72 per share over the last 60 days. The Zacks Consensus Estimate for 2014 also increased 1.3% to $3.97 in the same period.   

Other Stocks to Consider

Other medical stocks such as Alere , with a Zacks Rank #1 (Strong Buy), along with Exactech and SurModics (SRDX - Free Report) , both carrying a Zacks Rank #2 (Buy), are worth considering.

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