Medical device maker St. Jude Medical expects lower profits in 2016 than analysts had been expecting, as the company plans to retain more cash for other investments in the coming year.
The Little Canada-based medical device company told investors on Wednesday that sales will rise between 2 percent and 4 percent in 2016 on constant-currency basis, and profits will land between $3.95 and $4.05 per share. Analysts had been projecting earnings of $4.14 per share.
That would compare to 2015's adjusted net earnings of $3.94 per share on $1.13 billion in profit. Shares in St. Jude Medical rose early, but ended down 15 cents, at $54.30 during another tough day for the broader market.
Chief Financial Officer Don Zurbay said Wednesday that St. Jude is planning to make a number of investments in its higher-growth products to treat atrial fibrillation and heart failure, and its line of neuromodulation devices, which will offset potential earnings growth during the year.
"There is a certain amount of [earnings] leverage we want to achieve. But we are really trying to balance that with the continued investment in the growth drivers," Zurbay said in an interview. "We also wanted to make sure that we had guidance that is achievable and brings leverage and also brings investment. So it's kind of a balance."
Analysts with Leerink Partners in Boston said the earnings predictions for 2016 seemed "appropriately conservative," given that it's the first such guidance issued under Chief Executive Michael Rousseau, who became president and CEO on Jan. 1.
As previewed earlier this month, St. Jude Medical's sales of cardiac-rhythm devices like pacemakers and implantable defibrillators — which comprise the largest sales unit — declined to $580 million during the quarter that ended Jan. 2.
All told, the worldwide cardiac-rhythm device sales declined 10 percent from the same quarter last year, after correcting for negative currency impacts.
