St. Jude Medical Inc STJ.N on Wednesday posted higher-than-expected quarterly earnings and revenue as sales of devices to treat abnormal heart rhythms improved from earlier this year, sending its shares up 7 percent.
The company also raised the lower end of its full-year net earnings forecast and said sales would gain momentum this year as it rolls out a series of new heart devices.
St. Jude, which competes against Medtronic Inc (MDT.N) and Boston Scientific Inc (BSX.N) in selling implantable cardioverter defibrillators, had lost market share in the past year due to lingering concerns about problems with the lead wires that connect the devices to the heart. ICDs monitor and regulate heart rates via electrical shocks.
The company's Riata defibrillator leads were recalled in 2011 after insulation defects were found. U.S. regulators last year also raised questions about the design process for a second lead called the Durata.
St Jude said it believes its current leads are reliable and have no safety issues.
"We think we've turned the corner and moved past those pressures," St. Jude Chief Financial Officer Don Zurbay said in a telephone interview.
Sales of ICDs and pacemakers, the company's biggest product category, fell 4 percent to $718 million in the second quarter from a year earlier. The decrease would have been 2 percent if the impact of foreign currency was excluded.
Analyst Aaron Vaughn of investment firm Mid-Continent Capital said sales of the company's ICDs and pacemakers had improved from the first quarter.
"With all of the concerns over the Durata and Riata over the past year or so, this has got to be considered a good quarter for them," said Vaughn, whose company does not own St. Jude shares.
St. Jude said its second-quarter net income fell to $115 million, or 40 cents per share, from $244 million, or 78 cents per share, a year earlier, primarily due to costs from the early retirement of debt.
Earnings excluding special items were 96 cents per share. On that basis, analysts on average had expected 94 cents, according to Thomson Reuters I/B/E/S.
The St. Paul, Minnesota-based company, which also makes artificial heart valves, devices to treat atrial fibrillation and neurology products, said net sales declined slightly to $1.40 billion from $1.41 billion as the U.S. dollar strengthened against the yen and euro, reducing the value of overseas revenue.
Analysts on average had expected sales of $1.36 billion.
Excluding the impact of foreign currency translations, second-quarter sales increased by about 2 percent from a year earlier, St. Jude said.
St. Jude said it now expects full-year 2013 net earnings to be between $3.70 and $3.73 per share, increasing the lower end of the range by 2 cents.
Shares of St. Jude, which are trading at two-year highs, rose 7 percent to $51.87 on the New York Stock Exchange.
(Reporting by Susan Kelly in Chicago; Editing by Gerald E. McCormick, Lisa Von Ahn and Chris Reese)