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EARNINGS PREVIEW: US Medical-Device Cos Battle Sluggish Growth

By Jon Kamp and Nathalie Tadena, Of DOW JONES NEWSWIRES

TAKING THE PULSE: The tenuous conditions in big cardiology and orthopedic markets will remain in focus when U.S. medical-device companies begin reporting results next week. A key question is the health of the domestic market for implantable defibrillators — a major product for Medtronic Inc. (MDT), Boston Scientific Corp. (BSX) and St. Jude Medical Inc. (STJ) — that has shown strain since an unfavorable medical study came out early this year. On the orthopedics front, fiscal-quarter results from privately held Biomet on Tuesday suggested replacement-joint sales remain pressured by economic turmoil.


Johnson & Johnson (JNJ) – reports July 19

J J logo 2 images

Wall Street Expectations: Analysts surveyed by Thomson Reuters expect the health-care giant to post earnings of $1.23 a share on revenue of $16.22 billion. In the year-earlier period, Johnson & Johnson reported earnings $1.23 a share, including a 2-cent litigation gain, on revenue of $15.33 billion.

Key Issues: J&J’s quarter will feature $500 million to $600 million in restructuring charges pegged to last month’s announcement that the company’s Cordis unit will exit a $4 billion global market for drug-coated heart stents. Cordis was hurt by its inability to get new devices to market to fend off rising competition, plus an increasingly challenging environment beset by shrinking product prices. Elsewhere on the devices front, J&J’s DePuy unit will offer the next big clue, following Biomet, about the orthopedic market’s health.

Edwards Lifesciences Corp. (EW) – reports July 21

Wall Street Expectations: Wall Street is looking for earnings of 50 cents a share on revenue of $425 million. Last year, the heart-valve maker posted a profit of 48 cents a share, including 2 cents in charges, on revenue of $365.2 million.

Key Issues: Edwards Lifesciences’ most important event next week will come a day before its earnings release, when a Food and Drug Administration advisory panel will review the company’s closely watched catheter-delivered replacement heart valve. A favorable review could lead to later FDA approval, keeping Edward’s goal of a U.S. release later this year on target. That would also give the company a big U.S. lead in a fast-growing market for less-invasive valve surgery that has drawn significant competitive interest.

Zimmer Holdings Inc. (ZMH) – reports July 27

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Wall Street Expectations: Analysts expect the orthopedics heavyweight to report earnings of $1.19 a share on revenue of $1.13 billion. A year earlier, Zimmer earned 82 cents a share, or $1.09 a share excluding acquisition-related charges and other items, on revenue of $1.06 billion.

Key Issues: Despite the replacement hip-and-knee market’s challenges, Zimmer’s business has seen modest signs of improvement recently. In the first quarter, the company reported higher sales with help from new products while maintaining a forecast for recovery in U.S. procedure volumes in the second half this year. As the largest pure-play orthopedics company, Zimmer’s latest view of the market’s trajectory will be important.

Medtronic Inc. (MDT) – report expected Aug. 23

Wall Street Expectations: Analysts most recently forecast fiscal first-quarter earnings of 79 cents a share on revenue of $3.99 billion. A year ago, Medtronic reported a profit of 76 cents a share, or 80 cents a share excluding legal charges, on revenue of $3.77 billion.

Key Issues: Medtronic’s two top business — for heart-rhythm devices and spinal products — are both under pressure, raising the stakes for new Chief Executive Omar Ishrak. In addition to defibrillator-market sluggishness, the company is grappling with questions raised in a medical journal about the veracity of Medtronic-based research behind the company’s “InFuse” bone-growth product. Analysts anticipate this issue will pressure the company’s spinal franchise.

Boston Scientific (BSX) – reporting date to be announced

Wall Street Expectations: Wall Street expects earnings of 9 cents a share and revenue of $1.94 billion. Last year, Boston Scientific posted a profit of 6 cents a share on revenue of $1.93 billion.

Key Issues: Boston Scientific, which gets a larger sales contribution from drug-coated stents than competitors, could likewise become the biggest market- share beneficiary when J&J’s stent business goes off line. In the meantime, the company continues to grapple with falling prices and tough competition. A key issue for Boston Scientific is whether a stent it needs to replace one it currently shares with Abbott Laboratories (ABT) remains on track to arrive in the U.S. and Japan next year, which should boost profitability.

(The Thomson Reuters financial estimates and year-earlier figures may not be comparable due to one-time items and other adjustments.)

-By Nathalie Tadena, Dow Jones Newswires; 212-416-3287; nathalie.tadena@ dowjones.com

  (END) Dow Jones Newswires


Technorati Tags: Johnson & Johnson, Zimmer


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