St. Jude Medical Inc. (STJ - Analyst Report) posted a 7.8% rise in adjusted net earnings per share to 97 cents for the third quarter of 2014 from 90 cents in the year-ago quarter. With this, the St. Paul, MN-based medical device maker’s earnings per share beat the Zacks Consensus Estimate by a penny and met the upper-end of the company’s own guidance range of 95 to 97 cents for the quarter.

Net adjusted earnings rose 7.3% to $281 million from $262 million in the 2013-third quarter. Reported earnings were $238 million or 82 cents per share in the quarter, down from $262 million or 90 cents per share in the comparable quarter of 2013.

Revenues

Revenues grew 2.5% (both in reported and constant-currency) to $1,372 million for the quarter, lagging the Zacks Consensus Estimate of $1,382 million but lied within the company’s own guided range of $1,315 to $1,395 million.

New products such as CardioMEMS heart failure monitoring system contributed to the revenue growth in the quarter, offset by sluggish growth in international markets.

Revenues from the international market rose 2.0% to $706 million, accounting for 51.5% of total revenues. Revenues from the U.S. inched up 3.1% to $666 million, accounting for 48.5% of total revenues.

Product Division Results

In the Cardiac Rhythm Management (CRM) division, revenues inched up roughly 1% (both in reported and constant-currency) to $688 million. U.S. revenues upped 3.6% to $373 million but international revenues fell 2.2% to $315 million in the quarter.

In the CRM division, implantable cardiac defibrillator (ICD) revenues escalated roughly 1% (both in reported and constant-currency) to $422 million. Meanwhile, pacemaker revenues scaled up roughly 1% (both in reported and constant currency) to $266 million compared with the prior year quarter.

In the Atrial Fibrillation (AF) division, revenues escalated 7.7% (both in reported and constant currency) to $253 million. International revenues grew 11.5% to $155 million while U.S. revenues rose 2.1% to $98 million in the quarter.

In the Cardiovascular division, revenues went up 2.2% to $324 million in the quarter (both in reported and constant-currency). Revenues from the international market stayed nearly flat at $204 million while revenues from the U.S. market rose 5.3% to $120 million.

In the Cardiovascular division, vascular product revenues edged up roughly 1% to $169 million. Meanwhile, structural heart product revenues increased 4% to $155 million for the quarter.

In the Neuromodulation division, revenues went up 2.9% to $107 million in the third quarter, both on reported and constant-currency bases. Revenues from the U.S. ebbed 1.3% to $75 million but revenues from the international market improved 14.3% to $32 million in the 2014-third quarter.

Financial Position

St. Jude Medical had cash and cash equivalents of $1,294 million as of Sep 27, 2014, down 5.8% from $1,373 million as of Dec 28, 2013. Total debt rose 7.9% to $3,864 million as of Sep 27, 2014 compared with $3,580 million as of Dec 28, 2013. Consequently, debt-to-capitalization increased 340 basis points to 48.2% from 44.8% as of Dec 28, 2013.

Guidance

For the fourth quarter of 2014, St. Jude Medical expects revenues in the range of $1,385 to $1,465 million while the company anticipates adjusted net earnings per share to lie between $1.02 and $1.04 for the quarter. The current Zacks Consensus Estimates for revenues and earnings per share for the quarter are pegged at $1,509 million and $1.05.

For full year 2014, St. Jude Medical downgraded its revenues guidance to the range of $5,568 to $5,648 million compared with the earlier range of $5,640 to $5,760 million. The company has also modified its adjusted earnings per share guidance to the range of $3.97 to $3.99 compared with the earlier range of $3.96 to $4.01. The current Zacks Consensus Estimates for revenues and earnings per share for the year are pegged at $3.99 and $5,703 million.

Our Take

We are impressed with St. Jude Medical’s third quarter earnings beat but disappointed about the revenue miss. We are optimistic about the company’s recent acquisition of privately-held CardioMEMS, Inc. With the closure of the CardioMEMS acquisition, St. Jude Medical expects accelerated growth in its cardiovascular segment.

Further, with the completion of its acquisition of NeuroTherm, Inc., St. Jude Medical is now the only medical device manufacturer with a chronic pain product portfolio that offers both radiofrequency ablation and spinal cord stimulation.

Currently, St. Jude carries a Zacks Rank #4 (Sell). Some better-ranked stocks in the medical products industry include ZELTIQ Aesthetics, Inc. (ZLTQ -Snapshot Report), Abaxis, Inc. (ABAX -Analyst Report), and Alere Inc. (ALR - Snapshot Report). ZELTIQ Aesthetics sport a Zacks Rank #1 (Strong Buy), while both Abaxis and Alere carry a Zacks Rank #2 (Buy).

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