St. Jude Medical, Inc. (STJ) reported strong financial results for the first quarter of fiscal 2010. For the first quarter, earnings per share came in at 75 cents, beating the Zacks Consensus Estimate of 68 cents and the year-ago profit of 58 cents.
Sales
Total revenue in the first quarter increased 11% year over year to roughly $1,262 million. Excluding a favorable foreign currency translation (FX), net sales increased 8% year over year. Growth was registered across all business segments.
Cardiac Rhythm Management (CRM) sales increased 11% year over year to $752 million. Growth was led by a higher demand for the company’s implantable cardioverter defibrillators (ICD) and pacemakers that increased 15% and 6% year over year to $452 million and $300 million, respectively.
Cardiovascular sales increased 7% year over year to $256 million. Atrial Fibrillation revenues increased 17% year over year to $170 million. Neuromodulation revenues increased 15% year over year to $84 million.
Margins
St. Jude witnessed an expansion of margins in the first quarter. Gross margin increased 50 basis points (bps) year over year to 74.5%. Selling, general and administrative expenses as a percentage of sales declined 170 bps year over year to 35.1%. Research and development expenses (R&D) as a percentage of sales declined 30 bps year over year to 12%.
Higher gross margin coupled with lower operating expenses as a percentage of sales helped St. Jude increase its operating margin by 250 bps year over year to 27.4%.
Balance Sheet
St. Jude’s cash and cash equivalents stood at approximately $529.9 million at the end of the first quarter, compared to $392.9 million at the end of the previous quarter. The company ended the first quarter with an outstanding debt of roughly $1.9 billion.
Outlook
St. Jude has provided earnings per share guidance for the second quarter and fiscal 2010. For the second quarter, earnings per share are expected between 73 cents and 75 cents. For fiscal 2010, earnings per share are expected between $2.80 and $2.85, compared to the previous guidance of $2.71 to $2.76.
St. Jude is a leading designer, manufacturer and distributor of medical devices used for treating cardiovascular and neurological conditions. The company is a leader in the mechanical heart valve market.
St. Jude’s closest competitors are Medtronic Inc. (MDT) and Boston Scientific Corporation (BSX).
Currently, we are ‘Neutral’ on St. Jude.
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