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You've probably heard that heart disease is one of the leading causes of death in the U.S. I don't mean to be a total downer in bringing up this bit of trivia; in fact, the prevalence of cardiac-related illnesses is actually a boon for Minnesota-based St. Jude Medical (NYSE: STJ). The company is engaged in the design, manufacture, and distribution of various cardiovascular medical devices, including pacemakers, replacement valves, and many more.

In mid-October, St. Jude reported higher-than-expected third-quarter sales. The medical-device firm also tightened up its full-year outlook, primarily due to the effects of currency fluctuations. However, Chief Financial Officer John Heinmiller said STJ is "confident" it can meet or exceed Wall Street's 2009 earnings estimates.

St. Jude also believes it's well-insulated from macroeconomic turmoil. CEO Daniel Starks observed that his company's products address "key health concerns," which means they're hardly discretionary items. "We expect very minimal impact from the broader and economic dynamics, and think we're in a good defensive position that way," Stark noted.

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).

As the U.S. baby boom generation ages, demand for medical services is likely to increase, which is good news for St. Jude Medical.

St. Jude Medical (NYSE: STJ) develops and markets devices that treat cardiovascular disease and is also one of the world's leading manufacturers of mechanical heart valves.

St. Jude Medical's core business is its cardiac rhythm management division, which includes pacemakers, implantable cardioverter defibrillators [ICDs] and other equipment to regulate heart rhythm.

In general, analysts believe new product introductions and enhancements to existing products will allow STJ to increase its ICD market share in 2008, with overall company revenues advancing 13-17%. The Reuters F2007/F2008 EPS consensus estimates for STJ are $1.80/$2.09.

The risks? Analysts are keeping an eye on STJ's new product roll-out timetable. Further, negative changes to Medicare reimbursement rates would also hurt STJ's results.

The First Call mean rating for STJ is: Buy [25 firms]. Mean 2008 target: $47.00 [high: $54, low: $40].

Stock Analysis: St Jude Medical is a moderate-risk stock not suitable for low-risk investors. Investors with an investment horizon longer than two years should be rewarded from STJ's shares. Sell / Stop Loss if you were to purchase shares in this company: $28.

Being a particularly hard-working organ, the heart can be subject to bouts of irregular behavior. A world leader in the development and application of technologies designed to keep the heart running smoothly is headquartered in St. Paul, Minnesota.

St. Jude Medical Inc. (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 45 cents and revenues of $947 million. Analysts had been expecting 43 cents and $909.8 million. Management also guided Q3 EPS to 44-45 cents (45 cent consensus) and FY07 EPS to $1.74-$1.78 ($1.75 consensus). Wachovia subsequently upgraded the shares to "outperform" and Jefferies termed the valuation "attractive." The stock popped into a bullish "pennant" consolidation pattern on the news. Prices frequently exit pennants moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.

Altogether, brokers now recommend the issue with four "strong buys," nine "buys," nine "holds" and one "sell." Analysts see a 17% average annual growth rate, through the next five years. The STJ Sales Growth rate (13.69%), EPS Growth rate (18.42%), Operating Margin (21.46%), Net Profit Margin (15.65%), Return on Assets (11.12%), Return on Investment (13.68%) and Return on Equity (21.82%) 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 80% of the outstanding shares. Over the past 52 weeks, STJ has traded between $32.33 and $45.39. A stop-loss of $39.50 looks good here.

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.

MOST NOTEWORTHY: Microsoft (MSFT) and Darden Restaurants (DRI) top today's list of upgrades.

• Credit Suisse upgraded Microsoft Corp. (NASDAQ:MSFT) to "Outperform" from Neutral, citing the company's strengthening market position in digital entertainment and potential revenue upside.
• JP Morgan upgraded Darden Restaurants, Inc. (NYSE:DRI) to Neutral from Underweight, reflecting lower commodity costs and solid performance in Olive Garden.

OTHER UPGRADES:

• Triad Hospitals, Inc. (NYSE:TRI) was upgraded from Reduce to Buy at UBS; the upgrade is based on the increased confidence Triad will implement strategic changes to increase shareholder value.
• Morgan Stanley expected a rebound in the ICD market and upgraded St. Jude Medical, Inc. (NYSE:STJ) to Overweight from Equal Weight.
• SafeNet Inc (NASDAQ:SFNT) was added to Stifel Nicolaus' Select List with a $31 target. SafeNet is said to be making progress with their stock option issues and they find the valuation to be attractive.

Analyst summaries provided by TheFlyOnTheWall.com (subscription required).