STJ ST. Jude Medical, Inc.

Medical technology giant St. Jude (STJ) recently announced that its Board has authorized a new share buyback program, allowing it to repurchase up to $300 million of its common stock. The buyback will be executed at prices and time determined by management through open market transactions, privately negotiated transactions, or other means.

The Minnesota-based company stated that shares acquired in the repurchase program will be used for general corporate purposes. The company had roughly 320 million shares outstanding as of December 12.

Separately, St. Jude has kept its dividend for the fourth quarter at 21 cents a share (84 cents annualized), consistent with the dividend paid in the first three quarters of 2011. The company commenced paying quarterly cash dividend in February 2011.

St. Jude remains confident that it has reached a level where it can return value to investors in the form of dividends while continuing to invest in growth programs along with share repurchases and acquisitions. During third-quarter 2011, the company completed the $500 million repurchase program announced in August 2011.

St. Jude’s revenues and earnings for the third quarter beat the Zacks Consensus Estimates. Profit surged roughly 9% year over year as higher revenues more than offset hefty special charges. Revenue jumped 11.5%, led by healthy double-digit growth across the company’s Cardiovascular and Atrial Fibrillation franchises, aided by the AGA Medical acquisition.

St. Jude is consistently producing revenue growth and positive earnings surprise over the past several quarters. We are impressed by its solid fundamentals, healthy growth trajectory, strong product mix, robust pipeline and cost management initiatives.

A spate of new growth drivers (including new products and emerging markets) are expected to offer opportunities for accelerated sales growth over the next few years.  However, we remain wary about competition-driven pricing pressure in a soft CRM market.

A still choppy CRM space overhangs on St. Jude and its peers Medtronic (MDT) and Boston Scientific (BSX). Our long-term Neutral recommendation on St. Jude is in tandem with a short-term Zacks #3 Rank (Hold).

 
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