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St. Jude Medical (STJ) Q3 Earnings: What’s in the Cards?


St. Jude Medical Inc. STJ is set to report third-quarter 2016 earnings results on Oct 19. Last quarter, the company posted earnings of $1.06 per share, which came in line with the Zacks Consensus Estimate.

We note that St. Jude surpassed the Zacks Consensus Estimate in the last four quarters, by an average of 0.82%.

Let’s see how things are shaping up for this quarter:

Factors at Play

We believe St. Jude’s performance will suffer owing to a sluggish Cardiac Rhythm Management (CRM) market. The downside would come from pricing pressure, austerity measures and health care reforms in the market.

Foreign exchange movements are not favoring St. Jude’s results. The company derives more than half of its revenues from international operations, primarily in Europe and Japan. The strong U.S. dollar against the Japanese yen and euro may impede the performance in the third quarter.

The company also withdrew its financial guidance for fiscal 2016 as a result of its planned merger with Abott Laboratories. In this regard, St. Jude Medical is set to be acquired by Abbott Laboratories in a $25-billion deal. St. Jude shareholders will receive $46.75 in cash and 0.8708 shares of Abbott common stock. The company is thus expected to face certain integration risks as a result of the planned merger.

ST JUDE MEDICAL Price and EPS Surprise


Earnings Whispers

Our proven model does not conclusively show that St. Jude is likely to beat on earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or at least 3 for this to happen. That is not the case here as you will see below.

Zacks ESP: St. Jude currently has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate currently stand at $1.01.

Zacks Rank: St. Jude has a Zacks Rank #4 (Sell) which decreases the possibility of an earnings beat. Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are a few stocks worth considering that, as per our model, have the right combination of elements to post an earnings beat this quarter:

WellCare Health Plans WCG with an Earnings ESP of +5.41% and a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Achillion Pharmaceuticals, Inc. ACHN with an Earnings ESP of +6.25% and a Zacks Rank #2 (Buy).

Ascendis Pharma ASND with an Earnings ESP of +15.49% and a Zacks Rank #2.

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