Updated from 1:30 p.m. EDT
Considering the recalls, mergers and litigation that medical device makers have been through in recent months, some investors almost might be tempted to treat the upcoming earnings season as a holiday.
. The company, which is about to report earnings for what probably will be the final time, has made its last year as a standalone company interesting.
Shareholders in the Indianapolis-based firm have had to endure a string of product recalls in recent months, including one a
week before the end of the quarter. Now, it seems, they only have to hold on a little longer until the company's acquisition by
Johnson & Johnson
closes later this year.
Guidant's last fiscal quarter ended Sept. 30, and its results are just around the corner, along with the quarterly numbers from its top competitors.
Because this is likely the last time Guidant will have to go through this exercise, its stock probably doesn't stand to gain or lose much, regardless of what it reports for the third quarter. Analysts polled by Thomson First Call are looking for earnings of 51 cents a share with sales of $887.9 million for the quarter. A year ago, profit from continuing operations was 50 cents a share on sales of $924.5 million.
The company's recalls had led to
some speculation that J&J might try to change the terms of the $76-a-share acquisition, but that didn't happen. The stock now trades at around $71 from a closing low June 24 of $63.90 -- and an intraday low that day of $59.94 -- as a result of the recalls.
It's generally believed that Guidant's heart device business should mesh nicely with J&J's Cordis medical devices unit.
"Cardiac rhythm management (CRM) is a piece that will immediately fit well in JNJ's cardio franchise," analyst Bruce Cranna of Leerink Swann wrote in a recent research note. Cranna sees J&J bringing in $4.7 million in sales for its devices segment in the third quarter. The addition of Guidant will allow J&J, based in New Brunswick, N.J., to broaden its already vast health products empire.
For J&J, analysts expect the consumer health care and pharmaceuticals giant, whose business lines expand well beyond medical devices into such household brands as Band-Aids and Tylenol, to earn 86 cents a share on sales of $12.5 billion when it reports earnings later in October.
With Guidant wounded in recent months, analysts believe sales at competitors like
St. Jude Medical
For example, Jason Wittes, another Leerink Swann analyst, says that for the most recent quarter, Medtronic and St. Jude gained a combined $150 million to $200 million in defibrillator sales because of Guidant's troubles.
Medtronic's quarter ends later this month. On average, analysts see earnings of 51 cents a share and sales of $2.76 billion. For the year-ago second quarter, the Minneapolis-based company earned 44 cents a share and posted sales of about $2.4 billion.
The consensus third-quarter estimates for St. Jude, of St. Paul, Minn., are a profit of 39 cents a share with a top line of $727 million. The company is due to release its results next week. Last year, St. Jude earned 25 cents a share with sales of $578.3 million.
shareholders had to deal with disappointment this quarter on a couple of fronts.
Shares of Abbott took a 13.5% dive in the third quarter after the company lost a patent lawsuit, and a Food and Drug Administration advisory committee
refused to lend its support to the prospective prostate cancer drug Xinlay. However, Abbott plans to continue trials of the drug. Plus, the FDA isn't bound by the recommendations of its committees, though it usually does follow them.
Late last month, Abbott lost a case in which it had said rival
infringed patents covering an inhaled anesthetic. Abbott, whose varied product lines include stents and catheters, intends to appeal and claim that Baxter is infringing additional patents.
In July, the Abbott Park, Ill., company announced plans to record $200 million in restructuring charges and said it expected to earn 56 cents to 58 cents a share in the third quarter, excluding special items. The consensus estimate is for EPS of 58 cents and revenue of $5.38 billion.
was another medical device maker that had issues involving patents and recalls.
Last month, Boston agreed to pay an Israeli company called Medinol $750 million to settle a patent lawsuit relating to its Express and Taxus Express devices. Later, its shares were hit when it recalled its Enteryx injection kits for treating reflux after reports of serious adverse events.
In September, CFO Larry Best said third-quarter results were soft, and "revenue and earnings for the quarter are unlikely to reach the levels on which previous guidance for the quarter had been based." The company didn't provide specifics.
Boston Scientific shares sank 13% in the three months ended Sept. 30.
"Management is either going to set the bar really low so people will believe it, or show some convincing share gains in the quarter, which isn't likely considering they've already told people they're not going to make it," Wittes said of Boston Scientific.
Analysts surveyed by Thomson First Call see Boston earning 45 cents a share on $1.56 billion in sales for the latest quarter.
Leerink Swann has provided nonsecurities services to J&J, and a director of Guidant serves as a director of the firm. Leerink Swann doesn't have a business relationship with Boston Scientific, Medtronic or St. Jude.