St. Jude Medical (STJ) Prelim. Q4 Sales Light of Expectations

St. Jude Medical, Inc. (NYSE: STJ) announced preliminary sales results for the fourth quarter ended Jan. 2, 2016. These results will be referenced today in a presentation by St. Jude Medical President and Chief Executive Officer Michael T. Rousseau, at the 34th Annual J.P. Morgan Healthcare Conference in San Francisco. A webcast of the presentation can be accessed live on the Investor Relations section of sjm.com, beginning at approximately 10:00 a.m. PST.

The company expects to report consolidated net sales of approximately $1.447 billion for the fourth quarter of 2015, which is an increase of 7 percent on a constant currency basis, consistent with guidance of 7 to 8 percent consolidated constant currency growth.

*** The Street sees Q4 sales of $1.48 billion and EPS Of $1.01.

Fourth quarter sales of Thoratec products were approximately $136 million, exceeding previously issued guidance of $125 million to $130 million, driven by continued strength in the U.S. and the launch of Heartmate 3™ Left Ventricular Assist System in Europe. Full fourth quarter 2015 Thoratec sales of $143 million represent comparable constant currency quarterly sales growth of 15% over fourth quarter 2014 sales of $128 million.

When comparing net sales for the full fourth quarter of 2015 to the combined net sales of both St. Jude Medical and Thoratec for the fourth quarter 2014 and adjusting for foreign currency, our comparable constant currency sales decreased 1 percent.

Commenting on preliminary fourth quarter 2015 sales, Rousseau said, “We continue to execute our innovation-based growth strategy and made good progress during the fourth quarter in our areas of focus. The pressures to our business that we communicated heading into the quarter were partially offset by continued growth in atrial fibrillation and neuromodulation as well as strong sales from the recent Thoratec acquisition. In 2015, we set the stage to continue to expand our global leadership in heart failure, atrial fibrillation and neuromodulation in 2016.”

St. Jude Medical operates on a 52/53 week fiscal year convention with an extra 53rd week occurring approximately every six years. Accordingly, the company’s fiscal fourth quarter 2014 had one extra week of sales compared to fiscal fourth quarter 2015. In order to provide similar sales comparisons on a year-over-year basis the company recommends adjusting for the impact of this convention. While the calculation is not precise, the company estimates that these five fewer selling days in the fourth quarter of 2015 negatively impacted results by approximately 5 to 6 percentage points.

Cardiac Rhythm Management (CRM)

Fourth quarter CRM sales were approximately $580 million, a decrease of 10 percent on a constant currency basis over the fourth quarter of 2014. Global results were impacted by lower sales in the U.S. as the company is facing increased pressure in the MRI conditional category of products. This decline was partially offset by solid results in countries where MRI conditional products are offered and continued strong performance in CRT driven by MultiPoint Pacing™ technology in Europe.

Atrial Fibrillation (AF)

Atrial fibrillation product sales for the fourth quarter were approximately $276 million, an increase of 4 percent on a constant currency basis over the fourth quarter of 2014 driven by continued adoption of our FlexAbility™ and TactiCath™ ablation catheters.

Cardiovascular

Total cardiovascular sales, which primarily include structural heart and vascular products, were $327 million for the fourth quarter of 2015, which is an increase of 2 percent on a constant currency basis over the fourth quarter of 2014. Cardiovascular growth was primarily due to a successful initial launch of all sizes of our Portico™ Transcatheter Aortic Valve Implantation System in Europe as well as strong contributions from AMPLATZER™ Amulet™ Left Atrial Appendage Occluder in Europe and the Optical Coherence Technology (OCT) product portfolio.

Neuromodulation

Fourth quarter sales of neuromodulation products were approximately $128 million, an increase of 9 percent on a constant currency basis over the fourth quarter of 2014. Neuromodulation growth was driven by the St. Jude Medical Burst technology offering in Europe as well as the Protégé™ Spinal Cord Stimulation System with upgradeable features in the U.S.

Fourth Quarter Earnings Results

St. Jude Medical now expects its fourth quarter adjusted earnings per share to be in the range of $1.01-$1.02, narrowing the range from $1.00-$1.02. Adjusted earnings per share for the fourth quarter exclude net after-tax charges primarily related to acquisition-related costs, ongoing restructuring activities and amortization of intangible assets. A reconciliation of the company’s estimated non-GAAP adjusted net earnings per share to the company’s estimated GAAP net earnings per share is provided in the schedules at the end of the press release.

Conference Call/Webcast

The company will release its fourth quarter and full-year 2015 results and provide its first quarter and full-year 2016 guidance on Jan. 27 at approximately 6:15 a.m. CST. The press release will be followed by a conference call beginning at 7 a.m. CST. The conference call will be broadcast live on the Investor Relations section of sjm.com. St. Jude Medical will also be tweeting live during the call on our Investor Relations Twitter account, @StJudeMedicalIR.

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