St. Jude Medical ($STJ) is on its way toward concluding a remarkable year on Wall Street. Stock price gains for the Minnesota devicemaker surpassed 67% over the last 12 months, reflecting shareholder confidence over new product launches, higher earnings projections and a massive share repurchase program now underway.
Early on Dec. 19, St. Jude's stock traded at the $60.53 mark, up from a 52-week high of $59.39 in mid-day trading from Dec. 2 that Zacks Equity Research noted in a report a day later. By contrast, St. Jude closed at $36.15 on Dec. 19, 2012. Investors pushed the price up all year, but as Zacks explained, interest kicked into overdrive with St. Jude's 2013 third-quarter earnings release in October. It took months of job cuts, consolidation and M&A activity to get there, but the company reported a jump in net income of more than 40%. Revenue also grew slightly overall, despite flat demand for products in the CRM space and declining pacemaker sales. That itself was a big improvement over the previous year.
Through 2013, St. Jude had made strategic acquisitions of companies such as Nanostim, maker of the first leadless pacemaker. The company has also racked up important wins including a new CE mark for a larger size of its Portico transcatheter aortic heart valve implant, crucial for what has become a competitive European market for TAVI procedures. St. Jude also launched two major studies earlier in December to test a new neurostimulation approach for chronic pain and a neuromodulation combination treatment for back and leg pain, among many advances on the clinical and regulatory front all year.
Another big step: St. Jude's board voted earlier this month to authorize a $700 million share repurchase plan, a major stab at boosting long-term shareholder value.
The positivity is a long way from the issues St. Jude faced in 2011, after recalling its Riata defibrillator leads due to a number of production flaws. Replacement lead Durata also generated some controversy, including an FDA warning letter focused on manufacturing problems and shareholder lawsuits alleging Durata leads also were faulty and that St. Jude downplayed the risks.
Bad impressions can be hard to change. But St. Jude focused quietly over the last year on trying to refocus attention on accomplishments. Because executives took action on job cuts, reorganized, and heavily highlighted positive results as they came in, investors appear to have been swayed toward forgiveness. They may get angry again, however. Just this month, St. Jude pulled the plug on a U.S. clinical trial for its EnligHTN IV renal denervation system, with plans to try again in the future using a new protocol. Archrival Medtronic, meanwhile, kicked off another renal denervation trial and is poised to reach the market first. We'll see if investors are in a forgiving mood when that happens.
- read the Zacks report