Global medical devices major, St. Jude Medical (STJ) recently reported that its CEO, Mr. Daniel Starks, was arrested by New Delhi airport police for carrying ammunition. He was held at the airport after a lone shell was accidentally left in his clothes and discovered as he was moving through the airport.

Mr. Starks, a marksman, was subsequently released by police. Mr. Starks, who respects the local law, has chosen to delay his departure from the country until the matter is completely resolved. He was in India in an official capacity and was not in possession of any firearms.  

The CEO’s airport mix-up aside, St. Jude itself is doing very good in an otherwise challenging environment, as evident from its recent better-than-expected quarterly results. The earnings beat reflected strong contributions from the company’s implantable cardioverter defibrillator (“ICD”) business.

We remain intrigued by St. Jude’s ability to deliver consistent revenue and earnings growth. Moving forward, revenue growth should be fueled by numerous product introductions. In its fourth quarter 2010 call, the company had divulged a number of growth initiatives for fiscal 2011, which are expected to bolster its competitive position and boost the top line.

St. Jude is well positioned to savor incremental opportunities in cardiac rhythm management (“CRM”), especially in ICDs, on the back of its strong pipeline. Several new product launches across the U.S. and Europe should boost the company’s CRM market share in 2011. Moreover, the acquisition of AGA Medical Holdings has strengthened St. Jude’s cardiovascular business.

While we are impressed by St. Jude’s solid fundamentals, strong product mix, healthy growth trajectory and operating leverage, we remain wary about competition-driven pricing pressure, the dilutive impact of acquisitions and any unfavorable currency exchange fluctuations on the bottom line.

St. Jude competes, in niches, with other major global medical devices makers, such as Medtronic (MDT) and Boston Scientific (BSX). Our Neutral recommendation for the stock is backed by a Zacks #3 Rank (Hold).

 
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