UPDATE: St. Jude Issues Soft Prelim 3Q Results, Shares Drop
07 October 2009 - 12:57AM
Dow Jones News
Heart-device maker St. Jude Medical Inc. (STJ) issued
preliminary third-quarter results Tuesday that landed below both
company and Wall Street expectations while saying it felt pressure
from a financial squeeze on hospitals.
The company's comments and weak sales in the $11 billion market
for implantable heart-rhythm devices suggest a potential
industry-wide issue. Shares of St. Jude and rivals Medtronic Inc.
(MDT) and Boston Scientific Corp. (BSX) all fell in pre-market
trading.
St. Jude traded down 14% to $32.70, while Medtronic was down 2%
to $35.70. Boston Scientific slipped 3% to $9.80.
St. Jude also disclosed additional job cuts that, combined with
reductions announced in August, will trigger a third-quarter
charge. The company, which has roughly 15,000 employees worldwide,
has terminated about 250 workers in its manufacturing divisions in
addition to the prior elimination of about 200 U.S. sales, service
and support jobs, a spokeswoman confirmed.
The St. Paul, Minn., company said it now expects adjusted
third-quarter earnings of 57 cents to 58 cents per share, which is
below guidance in July for 61 cents to 63 cents. This forecast
excludes a charge of $50 million to $55 million, or 9 cents to 10
cents per share, associated with the job cuts.
Analysts surveyed by Thomson Reuters had projected earnings of
62 cents per share in the third quarter.
St. Jude expects to report sales of $1.16 billion for the
quarter, which is below Wall Street's forecast for $1.19
billion.
The company said a slowdown in hospital stocking of certain
medical devices was one factor that hurt sales.
"We believe that macro economic factors coupled with the
continued pressures surrounding healthcare reform resulted in
changes in purchasing behavior among some of our hospital
customers," said Daniel J. Starks, St. Jude's chairman and chief
executive, in a release.
The company will have an update during its earnings call in
mid-October, Starks said.
The preliminary sales tally for the heart-rhythm business, which
includes pacemakers and defibrillators, was $690 million. That is
up 2% from a year ago, or 5% excluding the impact of foreign
currency, but below the $700 million to $730 million range St. Jude
had forecast in July.
In the company's business for devices that treat the common
rhythm disorder atrial fibrillation, preliminary sales were $155
million. The company's cardiovascular business posted preliminary
sales of $230 million. In both cases sales were at or near the low
end of St. Jude's projections.
A lone bright spot was the neuromodulation business, where
preliminary sales of $84 million exceeded the company's
expectations.
-By Jon Kamp, Dow Jones Newswires; 617-654-6728;
jon.kamp@dowjones.com
(Joan E. Solsman contributed to this article.)