St. Jude Medical, Inc. (STJ) reported strong financial results for the fourth quarter and full fiscal 2009. For the fourth quarter, earnings per share came in at 64 cents, beating the Zacks Consensus Estimate of 62 cents and the year-ago earnings of 58 cents. For full fiscal 2009, earnings per share were $2.43, surpassing the Zacks Consensus Estimate of $2.42 and the year-ago earnings of $2.31.

Quarterly Results

Net sales in the reported quarter increased 6% year over year to $1,203 million. Growth was registered across all business segments.

Cardiac Rhythm Management (CRM) sales increased 3% year over year to $698 million. Growth was led by higher sales of the company’s implantable cardioverter defibrillator (ICD) and pacemaker that increased 2% and 3% year over year to $395 million and $303 million, respectively.

Cardiovascular sales increased 10% year over year to $240 million. Atrial Fibrillation revenues increased 10% year over year to $171 million. Neuromodulation revenues increased 21% year over year to $94 million.

St. Jude witnessed an expansion in margins. Gross margin increased 190 basis points (bps) year over year to 71.1%. Selling, general and administrative expenses as a percentage of sales declined 670 bps year over year to 33.2%. Research and development expenses (R&D) as a percentage of sales (excluding purchased R&D) declined 100 bps year over year to 11.2%.

Higher gross margin coupled with lower operating expenses helped St. Jude increase its operating margin by 3,910 bps year over year to 23.6%.

Fiscal Year Results

Net sales in fiscal 2009 increased 7% year over year to $4.681 billion. Excluding an unfavorable foreign currency translation (FX), net sales increased 10% year over year. Growth was witnessed across all business segments.

Cardiac Rhythm Management (CRM) sales increased 3% year over year to $2.769 billion. Cardiovascular sales increased 11% year over year to $953 million. Atrial Fibrillation revenues increased 15% year over year to $628 million. Neuromodulation revenues increased 30% year over year to $331 million.

St. Jude’s cash and cash equivalents stood at approximately $392.9 million at the end of fiscal 2009, compared to $136.4 million at the end of the previous year. The company ended fiscal 2009 with an outstanding debt of roughly $1.9 billion.

Outlook

St. Jude has provided earnings per share guidance for the first quarter and full fiscal 2010. For the first quarter, earnings per share are expected between 66 and 68 cents. For full fiscal 2010, earnings per share are expected between $2.71 and $2.76, an increase of roughly 12% to 14% year over year.

St. Jude is a leading medical devices manufacturer that designs, manufactures and distributes medical devices to treat cardiovascular and neurological conditions. The company’s closest competitors are Medtronic, Inc. (MDT) and Boston Scientific Corp. (BSX).

Presently, we have a Neutral recommendation on St. Jude Medical.

Zacks Investment Research

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