UPDATE 4-St. Jude quarterly net up, raises outlook

* Q3 EPS 63 cents vs 48 cents

* Sales up 7 pct, heart rhythm product sales up 7 pct

* Adjusted EPS of 72 cents v Street forecast of 68 cents

* Raises outlook for Q4

* Shares down 2.9 pct at mid-day
(Recasts first paragraph, adds CFO interview, detail, analyst
comment updates shares, byline)

By Debra Sherman

CHICAGO, Oct 20 (BestGrowthStock) – St. Jude Medical Corp (STJ.N: )
reported higher quarterly earnings, beating most Wall Street
estimates, but investor concerns about its core market for
cardiac rhythm management products weighed on its shares.

Chief Executive Dan Starks said during a conference call
with analysts that he expects global sales of cardiac rhythm
management (CRM) products — including pacemakers and
implantable heart defibrillators –to rise 3 percent
industrywide for 2010.

“To be conservative, we will assume that the global CRM
market will continue to grow approximately 3 percent annually,
due the impact of macroeconomic factors until we see evidence
of market recovery,” he said.

Analysts noted St. Jude lowered its outlook for the CRM
market, which represents more than half of the company’s
revenue.

Investors, said JPMorgan analyst Michael Weinstein,
overreacted to the company’s comments on CRM market growth.

“St. Jude had been out there forever with a 4 to 6 percent
forecast, which no one believed. So, they said on today’s call
the market is growing 3 percent, and so we’ll assume it stays
at 3 percent going forward. Basically they came down to the
Street in the market assumption,” Weinstein said.

St. Jude shares were down $1.15, or 3.9 percent, at $38.61
at mid-day on the New York Stock Exchange, while shares of its
main competitors rose. Shares of Medtronic Inc (MDT.N: ) were up
3.1 percent at $34.41, while shares of Boston Scientific Corp
(BSX.N: ), which reported quarterly results on Tuesday, were up
8.9 percent at $6.50.

Chief Financial Officer John Heinmiller said he did not
know why St. Jude’s stock is down.

“We’re pleased with our results and we’re positioned to
grow at superior rate … I can’t figure out the stock market,”
he said during a telephone interview.

The maker of heart pacemakers, valves and spinal cord
stimulation devices earned $208 million, or 63 cents per share,
in the third quarter, compared with $167 million, or 48 cents
per share, in the year-ago period.

After adjustment for the negative impact of foreign
currency translations and other items, St. Jude earned 72 cents
a share On that basis, Wall Street analysts on average expected
68 cents per share, according to Thomson Reuters I/B/E/S.

Quarterly sales totaled $1.24 billion, up 7 percent from
$1.16 billion a year ago. Foreign currency translations cut
revenue by about $10 million.

Sales in its Cardiac Rhythm Management unit, which includes
implantable heart defibrillators, or ICDs, were $738 million,
an increase of 7 percent, without adjusting for foreign
currency. ICD sales were $439 million, up 13 percent, also
without adjusting for foreign currency (Read more about trading foreign currency..

Heinmiller said St. Jude “definitely took (market) share”
from competitors in the latest quarter, both in new implants of
heart defibrillators and replacement defibrillators.

Sales of products used to treat atrial fibrillation rose 8
percent to $169 million, while sales in its neuromodulation
business gained 11 percent to $93 million.

The company raised its outlook for the fourth quarter,
calling for net earnings of 72 cents to 74 cents, putting
full-year earnings at $2.98 to $3.00.

Analysts on average were expecting full-year earnings of
$2.91 per share.

Starks said on the conference call that he expects revenue
from its migraine treatment — peripheral nerve stimulation —
to eventually become a growth driver for the company. Starks
said he anticipates winning European approval next year, but
was unsure about whether St. Jude could win U.S. approval with
its current data.

“Start to expect migraine-related revenue in Europe in
2012. We will start to expect a launch of migraine in Europe
before the end of 2011, and plan on nothing for migraine in the
United States for the time being. Leave it for potential
upside,” he told analysts.

JPMorgan’s Weinstein called this a noteworthy development,
adding that “it’s a potential big new, high-margin market
opportunity of $250 million plus and … it’s not in Street
models.”
(Reporting by Debra Sherman; Editing by Matthew Lewis,
Maureen Bavdek and Steve Orlofsky)

UPDATE 4-St. Jude quarterly net up, raises outlook