UPDATE 4-St Jude posts profit vs loss, shares slip

* Adjusted EPS 64 cents; Street view 62 cents

* Sales up 6 pct to $1.2 bln

* Sees ’10 profit $2.71-$2.76, vs Street view of $2.71

* Shares slide 18 cents
(Adds CFO interview, byline; updates stock)

By Debra Sherman

CHICAGO, Jan 27 (BestGrowthStock) – St. Jude Medical Corp (STJ.N: )
reported a slightly better-than-expected quarterly profit and
issued a 2010 forecast that exceeded Wall Street’s estimates.

But its shares slipped 18 cents to $37.63 in late morning
trading, tracking weakness in the medical technology sector, as
investors fretted over the company’s 2010 outlook that seemed
to assume growth would ramp up as the year progresses.

St. Jude, a maker of heart and other medical devices, said
it expects first-quarter earnings to be 66 cents to 68 cents
per diluted share, and 2010 earnings to be $2.71 to $2.76,
which would be an increase of about 12 percent to 14 percent
over 2009.

According to Thomson Reuters I/B/E/S, Wall Street analysts
were expecting earnings in the first quarter and full year to
be 65 cents and $2.71, respectively.

“The guidance is back-end loaded and I think people are a
little concerned about margins,” Jefferies & Co analyst Peter
Bye said.

In a telephone interview, Chief Financial Officer John
Heinmiller said the pressure on gross margins is mainly tied to
costs related to the launch of its new wireless pacemaker
product line. He said he expects gross margins to improve with
each quarter as manufacturing and other costs come down.

“Margins will improve through 2010. They’ll be better in
2011 and 2012,” he said.

Michael Weinstein, an analyst with JP Morgan, called the
company’s 2010 forecast “encouraging,” adding that management
“set a bar we think the company can beat.”

“We think those focused on the (gross margin) line miss the
bigger picture and the potential upside to St. Jude estimates
in 2010-11. We believe Street estimates will certainly increase
following today and we’re convinced with the SG&A, cash flow,
and tax leverage that St. Jude has at its disposal that numbers
will continue to move higher over the course of 2010,”
Weinstein wrote in a research note.

In the latest quarter, St. Jude posted a net profit of $190
million, or 57 cents per share, compared with a year-earlier
loss of $201 million, or 58 cents a share.

Excluding one-time items, earnings were 64 cents per share.
On that basis, the average estimate on Wall Street was 62 cents
per share, according to Thomson Reuters I/B/E/S.

Fourth-quarter net sales rose to $1.203 billion from
$1.133 billion in the fourth quarter of 2008. The 2009 period
contained one less week. Foreign currency translations
increased fourth-quarter sales by about $50 million.

Cardiac Rhythm Management sales — the company’s biggest
segment that includes implantable cardioverter defibrillator,
or ICDs, and pacemaker products — were $698 million in the
fourth quarter, up 3 percent from a year ago. After adjusting
for the impact of foreign currency (Read more about trading foreign currency., total CRM sales fell 1
percent.

Of that total, ICD product sales were $395 million in the
fourth quarter, a 2 percent increase over a year ago. ICD
revenue growth decreased 1 percent after adjusting for the
impact of foreign currency (Read more about trading foreign currency..

“We continued to expect the global CRM market to grow at
… 4-to-6 percent on a constant currency basis. We estimate
that St. Jude Medical’s international CRM business grew faster
than the market in 2009 and is on track to do so again in
2010,” Chief Executive Dan Starks said on a conference call.

He said sales from St. Jude Medical’s U.S. CRM business
were flat in 2009, but expects a return to growth in 2010.

“We are optimistic that the U.S. portion of our CRM
business will get back on track to grow faster than the market
in 2010,” Starks added.

Stock Market Report

(Reporting by Debra Sherman; editing by John Wallace and
Maureen Bavdek)

UPDATE 4-St Jude posts profit vs loss, shares slip