Wednesday, December 10, 2008

Marcial: Vital Signs at St. Jude Medical

Marcial: Vital Signs at St. Jude Medical

For certain types of health care, spending isn't discretionary: When you are having, say, a heart problem, you don't postpone treatment or medical help. So you would think that makers of life-saving medical devices would be classic defensive (i.e., recession-resistant) plays. Yet the stock market has been, well, heartless, as health-care stocks have been battered with the rest of the market.

But that's all the more reason why some stocks in the sector have become compelling buys. After all, many of the companies that have been smacked around have solid fundamentals, and the price declines have made them more attractive.

One example: St. Jude Medical (STJ), a leading maker of cardiac rhythm management devices, including implantable cardioverter defibrillators (ICDs). These devices are used to treat hearts that beat too fast by monitoring the heartbeat and delivering high-energy electric impulses to stop the erratic beating. St. Jude also makes pacemakers and other cardiac devices.

Shares of St. Jude, like most other stocks, have been walloped: It's down to 30 a share on Dec. 9, from a 52-week high of 48.49 on July 17. In 2006, the stock traded as high 54.80. Its current price-earnings ratio of 13.6 compares with its five-year high of 51 in 2005.

Health Profit Outlook

But the decline hasn't turned off the bulls. "We continue to view St. Jude as attractively positioned to deliver sustained and above-average market sales and earnings growth," says analyst Michael Jungling of Merrill Lynch (MER), who rates the stock a buy, in a Dec. 2 report.

Because of the effects of the stronger U.S. dollar on overseas sales, St. Jude has lowered its forecasts for the fourth quarter, prompting analysts to cut their own estimates as well. Nonetheless, Wall Street remains generally bullish on the stock, with 18 analysts recommending it as a buy and 9 rating it a hold, according to data from Bloomberg. Only one analyst tags it a sell.

  • Health 2.0: Patients as Partners
  • Health 2.0: Patients as Partners
  • Marcial: J&J, a Healthy Defensive Play
  • No comments: