Zacks Industry Outlook Highlights: Medtronic, Boston Scientific, St. Jude Medical, Edwards Lifesciences and ZOLL Medical

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Sep 08, 2011, 09:30 ET

CHICAGO, Sept. 8, 2011 /PRNewswire/ -- Today, Zacks Equity Research discusses the Medical Devices, including Medtronic Inc. (NYSE: MDT), Boston Scientific Corporation (NYSE: BSX), St. Jude Medical (NYSE: STJ), Edwards Lifesciences (NYSE: EW) and ZOLL Medical (Nasdaq: ZOLL).

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A synopsis of today's Industry Outlook is presented below. The full article can be read at http://www.zacks.com/stock/news/60372/Medical+Devices+Stock+Outlook+-+Sept.+2011

In our universe, we see growth potential in companies dealing with cardiovascular devices, neuro and radiation oncology products. Names include Medtronic Inc. (NYSE: MDT), Boston Scientific Corporation (NYSE: BSX), St. Jude Medical (NYSE: STJ), Edwards Lifesciences (NYSE: EW) and ZOLL Medical (Nasdaq: ZOLL).

The above-listed companies produce life-sustaining products and are less affected by economic turbulence. Some of these companies have been successful in weathering the storm (pricing, currency and volume headwinds) in the cardiovascular space.

Also, the radiation oncology market is benefiting from improving trends and technology advancements, providing a compelling growth opportunity. These companies are all leading players in their respective fields and are potential winners in the long run.

MedTech Giants: A Few Hiccups but Long-Term Winners

With a spate of new products, the Big Three players (Medtronic, Boston Scientific and St. Jude) in the $6.5 billion implantable cardioverter defibrillator ("ICD") market are well-positioned to gain market share, despite the challenging business environment and several other barriers to growth. These companies have a number of levers to pull and represent a good bet for long-term investors.

Among the names above, Medtronic, the undisputed leader in the MedTech space, has a diversified presence in cardiovascular, neuro, spinal, diabetes and ENT and boasts an attractive pipeline. Although the company witnessed weakness in its ICD business in the most recent quarter, new products should gradually contribute to growth and help it maintain/gain ICD share.

The long-awaited issue of the FDA warning letters, relating to Medtronic's Mounds View facility and manufacturing unit in Puerto Rico, was finally resolved in March 2011, paving the way for the U.S. approval and launch of new products including the much-anticipated Protecta ICD device.

Boston Scientific has maintained its leadership in the drug eluting stent ("DES") market. The company saw all-round growth during the second quarter, outstripping its own guidance, although the CRM segment remains challenging. After several quarters, growth in the Cardiovascular portfolio came as a pleasant surprise. Based on a strong quarter, the company raised its guidance for 2011. We recently upgraded the stock to Outperform.

We remain intrigued by St. Jude's ability to consistently produce positive earnings surprises and revenue growth. The company is poised for incremental opportunities in CRM on the back of strong product momentum. St. Jude's Fortify and Unify devices are already gaining notable traction.

Several new products (including the quadripolar CRT-D systems) should boost the company's CRM share in 2011, despite the weak market conditions. However, we do account for the fact that approval of the highly-anticipated quadripolar CRT-D, has been pushed back to early fourth-quarter 2011 from mid-2011.

Beyond the MedTech giants, Edwards Lifesciences represents another value proposition. The company recorded strong revenue growth in the second quarter, banking on robust performance of its heart valve therapy products. Apart from heart valve therapy, healthy growth at the critical care segment (led by Flotrac systems and pressure monitoring products) is also encouraging.

Moreover, Edwards's robust balance sheet enables it to target suitable acquisitions. Following the favorable recommendation of the FDA Advisory Panel for Sapien THV (for inoperable patients), the company is confident of receiving final approval by October 2011. The U.S. approval of the device should offer a major boost to the company's sales in the long term.

Another interesting pick in our portfolio is resuscitation devices-maker ZOLL Medical. ZOLL is a leading player in the global market for external defibrillators, which is worth more than $1 billion. The company's LifeVest wearable defibrillator business continues to grow at a healthy quarterly run rate, benefiting from increased awareness of the product and associated sales force enhancements. Moreover, its significant international presence should also push growth.

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