The Zacks Analyst Blog Highlights: BJ's Wholesale Club, Costco Wholesale Corporation, Medtronic, St Jude Medical and Boston Scientific Corporation

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Aug 17, 2011, 09:30 ET

CHICAGO, Aug. 17, 2011 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: BJ's Wholesale Club Inc. (NYSE: BJ), Costco Wholesale Corporation (Nasdaq: COST) Medtronic (NYSE: MDT) St Jude Medical (NYSE: STJ) and Boston Scientific Corporation (NYSE: BSX).

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Here are highlights from Tuesday's Analyst Blog:

Earnings Preview: BJ's Wholesale

BJ's Wholesale Club Inc. (NYSE: BJ), a leading warehouse club operator in the United States, is scheduled to report its second-quarter 2011 financial results before the bell on Wednesday, August 17, 2011. The current Zacks Consensus Estimate for the quarter is 76 cents a share. The Zacks Consensus estimates revenue at $3,005 million for the second quarter.

First-Quarter 2011, a Synopsis

BJ's Wholesale posted better-than-expected first-quarter 2011 results on the heels of a rise in traffic, increase in sales of perishable foods and gasoline, and effective cost management. The quarterly earnings of 63 cents a share beat the Zacks Consensus Estimate of 56 cents, and surpassed its own guidance range of 54 cents to 58 cents. The quarterly earnings also rose 26% from 50 cents in the prior-year quarter.

Total revenue, which includes net sales, membership fees and other revenue, jumped 10% to $2,829 million from the prior-year quarter and came well ahead of the Zacks Consensus Estimate of $2,802 million. Comparable club sales for the quarter grew 6.3%, including a positive impact of 3.9% from gasoline sales.

Second-Quarter 2011 Consensus

The analysts surveyed by Zacks expect BJ's Wholesale to post second-quarter 2011 earnings of 76 cents a share. The current Zacks Consensus Estimate compares with 67 cents a share earned in the year-ago quarter. The estimates in the current Zacks Consensus for the quarter range from a low of 72 cents to a high of 80 cents.

Zacks Agreement & Magnitude

Of the 13 analysts following the stock, only 1 analyst revised the estimate upwards in the last 30 days, having no material impact on the Zacks Consensus Estimate of 76 cents. In the last 7 days, none of the analysts revised their estimates keeping the Zacks Consensus Estimate unchanged.

Mixed Earnings Surprise History

With respect to earnings surprises, BJ's Wholesale has missed as well as topped the Zacks Consensus Estimate over the last four quarters in the range of negative 8.2% to positive 19.4%. The average remained at positive 6.8%. This suggests that BJ's Wholesale has beaten the Zacks Consensus Estimate by an average of 6.8% in the trailing four quarters.

BJ's in Neutral Lane

BJ's will sustain its investments in Club payroll, Club remodels and technology to augment the sales of perishable items, which have helped in increasing sales, improving traffic count and gaining market share. The company has also benefited from rising gasoline prices.

Further, a negligible debt-load and healthy cash reserves augur well for future operating performance. However, a sluggish economic recovery and an erratic consumer behavior could intensify pricing competition. Moreover, BJ's clubs being highly concentrated in northeastern U.S. may see cannibalization of sales with the opening of new stores in existing markets.

Currently, we have a long-term 'Neutral' recommendation on the stock. Moreover, BJ's Wholesale, which faces stiff competition from Costco Wholesale Corporation (Nasdaq: COST), holds a Zacks #3 Rank that translates into a short-term 'Hold' rating.

Promising Therapy from Medtronic

Leading medical devices player, Medtronic (NYSE: MDT) recently announced positive data for its InterStim therapy. It was observed that the therapy could improve the quality of life in a majority of patients after three years of follow -up. Earlier, in April 2011, the company had received approval from the US Food and Drug Administration (FDA) for its InterStim therapy for bowel control. The therapy was also prescribed for treating overactive bladder and non-obstructive urinary retention.

The three-year follow-up data on 120 patients was published in the September issue of "Diseases of the Colon and Rectum". The analysis was carried out to check the safety and effectiveness of the InterStim therapy. Among the 77 patients who completed all the three follow-up assessments, 86% witnessed a 50% reduction in the number of incontinent episodes per week compared to baseline. Moreover, patients experienced significant improvements in overall quality of life at 12, 24 and 36 months of follow-up.

In the third quarter of fiscal 2011, this segment generated $432 million in sales, up 5% (4% at CER) from the year-ago period. Following the FDA approval of InterStim therapy for bowel control, the company is working on securing reimbursement as it plans to expedite its launch in fiscal 2012.

Fiscal 2011 has been one of the most challenging years for Medtronic precipitated by the macroeconomic downturn and decreased utilization. According to the company's estimates, its markets are currently growing in the low-single digits versus 6−7% in the previous year. Although the situation is improving gradually, the two biggest segments at Medtronic – CRDM and Spinal continue to remain under pressure. As a result, the company is focused on developing new technologies to make up for lost sales.

Over the past few years, Medtronic has been reallocating resources towards new therapies and emerging markets to drive growth. Meaningful acquisitions include Ardian, Invatec, Osteotech and ATS Medical. Following the launch of Protecta and Revo MRI in the US, pricing and market share are expected to improve. However, the company faces tough competition from players like St Jude Medical (NYSE: STJ) and Boston Scientific Corporation (NYSE: BSX).

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