St. Jude Medical (NYSE: STJ) designs,
manufactures, and distributes medical devices for heart-related and neurological conditions. The firm's Cardiac Rhythm Management segment makes pacemakers and implantable cardioverter defibrillators, to regulate heart rhythm. The Neuromodulation unit develops pacemaker-like implantable systems to treat chronic, intractable pain, and other nervous system disorders. The Cardiovascular division offers therapies and technologies for treating people with cardiovascular and peripheral vascular disease. The Atrial Fibrillation segment develops products to diagnose, treat, and seek a cure for atrial fibrillation. Boston Scientific (NYSE: BSX) is a major competitor.
The company pleased investors last week, when it reported Q2 EPS of 60 cents and revenues of $1.14 billion. Analysts had been expecting 55 cents and $1.06 billion. The CEO noted that revenue exceeded guidance in every business category. Management also guided Q3 EPS to 56-58 cents (53 cent consensus) and FY08 EPS to $2.28-$2.33 ($2.19 consensus).
The stock
popped into a bullish "flag" consolidation pattern on the news. Prices frequently exit flags moving in the same direction they were traveling on entry. In this case, that would be to the upside.
Brokers recommend the issue with eight "strong buys", nine "buys", eight "holds" and one "sell". Analysts see a 15% average annual growth rate, through the next five years. The STJ Sales Growth rate (19.92%), EPS Growth rate (33.33%), Operating Margin (23.26%), Net Profit Margin (16.24%), Return on Assets (12.43%), Return on Investment (16.12%) and Return on Equity (23.64%) compare favorably with industry, sector and S&P 500 averages. The stock is one of those used to calculate the S&P 500 Index. Institutional investors hold about 87% of the outstanding shares. Over the past 52 weeks, STJ has traded between $36.90 and $48.49. A stop-loss of $40.60 looks good here.
Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com. He does not hold a position in either of the stocks discussed above.
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