St. Jude Medical (STJ) Q2 Earnings: What's In The Cards?

St. Jude Medical Inc. (NYSE:STJ) is set to report second-quarter 2016 earning results on Jul 20. Last quarter, the company posted earnings of 90 cents per share, which comfortably beat the Zacks Consensus Estimate by a couple of cents.

We note that St. Jude surpassed the Zacks Consensus Estimate in the last four quarters, by an average of 1.83%.

Let’s see how things are shaping up for this quarter:

Factors at Play

We believe strong momentum at St. Jude’s Heart Failure (HF), Neuromodulation and Atrial Fibrillation (AF) businesses and a string of regulatory approvals for its new products over the last few months are key growth drivers.

For the second quarter of 2016, St. Jude expects sales growth in the range of 1% to 3% at constant currency, on a comparable basis. Earnings are forecasted in the band of $1.05 to $1.07 per share.

We believe that an expanding total addressable market and innovative product portfolio will drive growth in 2016.

Notably, St. Jude is set to be acquired by Abbott Laboratories (NYSE:ABT) in a $25 billion deal. St. Jude’s shareholders will receive $46.75 in cash and 0.8708 shares of Abbott Laboratories’ common stock, representing approximately $85 per share.

Earnings Whispers

Our proven model does not conclusively show that St. Jude is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or at least 3 for this to happen. That is not the case here as you will see below.

Zacks ESP: St. Jude currently has an Earnings ESP of -1.89%. This is because the Most Accurate estimate of $1.04 is lower than the Zacks Consensus Estimate of $1.06.

Zacks Rank: St. Jude has a Zacks Rank #2 (Buy) which increases the possibility of an earnings beat. However, when combined with a -1.89% ESP, it makes surprise prediction difficult.

Meanwhile, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are a few stocks worth considering that, as per our model, have the right combination of elements to post an earnings beat this quarter:

Innoviva Inc. (NASDAQ:INVA) , earnings ESP of +25% and a Zacks Rank #1 (Strong Buy).

CytRx Corp. (NASDAQ:CYTR) , earnings ESP of + 15% and a Zacks Rank #1.

WellCare Health Plans (NYSE:WCG) , earnings ESP of + 0.73% and a Zacks Rank #1.

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