3 Keys From St. Jude Medical’s Q2 Earnings You Need to Know

An Impressive Earnings Beat

• St. Jude Medical crushed its Q2 earnings on Wednesday, beating projections on top and bottom lines

• Adjusted EPS jumped to $1.02 in the quarter, up from 40 cents a year ago

• Revenue also climbed, gaining more than 3%

Logo source: St. Jude Newsroom

#1: CRM Surprise

• St. Jude delighted investors with a 2% gain in cardiac rhythm management (CRM) device sales

• CRM market has been hit hard by tight hospital budgets, tough competition, and falling prices. Chief rival Boston Scientific is a prime example of the downturn, with falling CRM sales in each of the past two years

• The biggest boost to St. Jude’s CRM division: International sales jumped in Q2, climbing 4% YOY

• The business’s growth is important for the company. CRM sales made up just over 50% of St. Jude’s total sales in the quarter.

Can St. Jude’s Heartbeat Strengthen?

• St. Jude’s CRM business still faces tough hurdles ahead of consistent growth

• Obamacare’s expansion projected to slow CRM market growth in the U.S. through 2020, according to research firm GlobalData• International growth is St. Jude’s best bet: Europe and emerging

markets are expected to gain market share as the worldwide CRM market could see up to 4.6% annual growth between 2012 and 2020

• Competition could cause problems. Medtronic’s acquisition of Covidien gives the device giant and St. Jude rival more leverage to negotiate with hospitals – and an advantage over competitors in an era of shrinking hospital budgets

Source: St. Jude Medical Media Kit

#2: Atrial Fibrillation Still On Track

• Atrial Fibrillation is St. Jude’s biggest growth driver: Division saw 8% overall sales growth in Q2

• International growth thrived, with a 10% jump in revenue YOY

Source: St. Jude Medical Media Kit

Can Atrial Fibrillation Keep Pumping Growth?

• Atrial fibrillation is one of St. Jude’s best growth hopes – and the company needs to keep pushing hard into this market

• Transparency Market Research projected annual AF market growth of more than 13% between 2012 and 2019

• Business currently makes up only around 17% of total company sales, but this market increasingly is emerging as an important cog of St. Jude’s long-term future prospects

#3: Neuromodulation

• St. Jude’s promising neuromodulation business stumbled in Q2, falling 1% YOY

• A tale of two businesses: While international revenue climbed by 29%, U.S. neuromodulation sales plunged by 11% to lead the drop

Source: St. Jude Medical Media Kit

Better Days Ahead?

• While St. Jude’s business dropped, potential still abounds in this market – and the company’s pushing ahead at full steam

• Transparency Market Research projects greater than 14% annual growth in the neuromodulation device market between 2012 and 2018

• The company paid $200 million earlier this month to acquire NeuroTherm, a company focused on chronic pain management, to beef up neurostimulation portfolio• St. Jude is also pushing to achieve FDA approval for its Prodigy device in treating

chronic pain, a growing market that’s expected to continue climbing as the U.S. population ages

Looking Ahead

• St. Jude slightly boosted its full-year earnings outlook, raising the guidance by a penny and lifting the bottom end of its full-year revenue guidance.

• The company’s Q3 EPS projection lines up with analyst estimates, but with the struggles of the CRM market in the recent past, St. Jude will need to keep growth churning in order to meet Wall Street’s expectations

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