Zacks Analyst Blog Highlights: Accenture plc, International Business Machine, Medtronic, Boston Scientific and St. Jude Medical

Mar 28, 2011, 09:30 ET from Zacks Investment Research, Inc.

CHICAGO, March 28, 2011 /PRNewswire/ -- Zacks.com Analyst Blog features: Accenture plc (NYSE: ACN), International Business Machine Inc. (NYSE: IBM), Medtronic (NYSE: MDT), Boston Scientific (NYSE: BSX) and St. Jude Medical (NYSE: STJ).

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Here are highlights from Friday's Analyst Blog:

Accenture Beats, Raises Outlook

Accenture plc (NYSE: ACN) reported second quarter 2011 earnings per share (EPS) of 75 cents, beating the Zacks Consensus Estimate of 71 cents. The quarter's earnings increased 25.0% from the year-ago quarter, attributable to higher revenues and margins as well as a lower share count and tax rate, partially offset by unfavorable foreign-exchange rates. Shares jumped 5.33% in the after-hour trade.

Guidance

For the third quarter of fiscal 2011, Accenture expects net revenue in the range of $6.3 billion to $6.5 billion. This figure was arrived at after taking into consideration a 4% positive foreign-exchange impact. The Zacks Consensus Estimate was for earnings of 85 cents.

Accenture assumes a positive foreign-exchange impact of 2% for its full-year revenue forecast. For fiscal 2011, the company expects net revenue growth in the range of 11.0% to 14.0%, up from the previously announced range of 8.0% to 11.0%. Expectations for new bookings were maintained in the range of $25.0 billion and $28.0 billion, though management remains somewhat concerned about contribution from Japan. The company also reiterated its operating margin guidance at 13.6% to 13.7% and annual tax rate at 28.0% to 29.0%. Diluted EPS expectation has been upgraded to $3.22–$3.30 from the previously guided range of $3.08–$3.16. The earnings guidance surpassed the Zacks Consensus Estimate of $3.16

Accenture also forecast operating cash flow in the range of $2.8–$3.0 billion (previously $2.7–$2.9 billion); property and equipment additions of roughly $420.0 million (previously $340.0 million); and free cash flow in the range of $2.4 billion to $2.6 billion (reiterated). 

Recommendation

We believe that second quarter results are encouraging, as the bottom line strongly beat the Zacks Consensus Estimates. Based on improving business momentum and market share gains, Accenture raised its revenue and earnings guidance for fiscal 2011. Moreover, we are encouraged by the steady flow of new business, and believe that the trend will likely continue.

Apart from this, we remain encouraged with Accenture's deal wins from various industry verticals. We also appreciate successive acquisitions by Accenture as these enrich the company's product portfolio. However, increasing competition from International Business Machine Inc. (NYSE: IBM) may temper growth prospects to some extent. 

Currently, Accenture has a short-term Buy recommendation, implying a Zacks #2 Rank.

FDA Approves MDT Device

In a positive development for Medtronic's (NYSE: MDT) Cardiac Rhythm Disease Management ("CRDM") segment, the US Food and Drug Administration (FDA) has approved its Consulta and Syncra cardiac resynchronization therapy-pacemaker (CRT-P) systems. Medtronic plans to begin the shipment of the products in the immediate future.

For the first time, these two CRT-Ps will include 'Leadless ECG Waveform' and will work together with Medtronic's Care Link Network device data monitoring system in order to recommend the chance of remote follow -up in patients implanted with the newly approved systems. 

Moreover, Consulta will also include Medtronic's OptiVolFluid Status Monitoring and Complete Capture Management to detect the risk of acute heart failure in patients well in advance as well as ensure greater longevity of the machine. This entire product line, under the CRDM segment, will offer a more superior system with greater efficiency and user-friendly features.

The CRDM business, which constitutes a significant 30% of Medtronic's total revenues, declined 2% year over year during the third quarter of 2011 due to slower market growth and pricing pressure. This included a 5% decline in revenue from pacemakers in the U.S. and a 5.4% decline in the international market. However, the extent of the decline in the quarter was less on a sequential basis.

Medtronic has adopted several strategic initiatives to reinforce its leadership in the fiercely competitive medical devices industry as it battles for market share with other major players such as Boston Scientific (NYSE: BSX) and St. Jude Medical (NYSE: STJ). Given the huge potential in the cardiac resynchronization therapy market, Medtronic has been reallocating resources towards emerging therapies to drive growth. The FDA approval, in this regard, is expected to add to the fortunes of its CRDM unit.

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