It fascinates me that investors make some of the same mistakes over and over again, with probably the most common one being the fallacy that "it's different this time." In the case of St. Jude
The company warned that first-quarter results were going to come in short of its own internal expectations and analyst projections alike. Sales for the quarter look to have been about $784 million versus the company's prior guidance of between $799 million and $839 million and analyst expectations ranging from $789 million and $855 million -- with an average of about $827.5 million.
Earnings per share, which the company forecasted to fall between $0.41 and $0.43, will instead be around $0.35 or $0.36 -- also below the analyst average of $0.39 (and the range of $0.37 to $0.42).
The culprit is pretty clear -- sales of implantable cardioverter defibrillators, or ICDs, grew only 27% to about $262 million. I realize "only 27%" growth is a level that many CEOs would trade their own mothers to get, but St. Jude had been reporting growth of between 62% and 92% in the past few quarters. And while there were signs in the last quarter that the market was slowing at faster rate than people had expected, it looks as though the U.S. slowdown has continued.
Assuming that this is a marketwide phenomenon, this will be bad news for both Medtronic
Even though the stock got far too expensive, I have liked and continue to like this company. What's more, I believe it could still be a viable target for certain large health-care companies that may be in an acquisition frame of mind. While 20% ICD market growth may no longer be realistic, this is still a market with positive growth potential and a company that is gradually building a broader base of business. Now if I could just find the shares at an attractive price.
Play doctor, Motley Fool style:
Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).