St. Jude's Abbott Merger On Track For Q4

St. Jude Medical, Inc. STJ expects to complete its merger with Abbott Laboratories ABT by yearend 2016. Argus’s David Toung maintained a Hold rating on St. Jude, citing the pending acquisition.

St. Jude reported its Q2 adjusted EPS at $1.06, up from $1.03 a year earlier. GAAP net income came in at $238 million, or $$0.83 per share, representing a y/y decline from $290 million, or $1.02 per share. The company posted net sales of $1.562 billion, up 11 percent. EBIT margin came in at 23.0 percent, down 130bps from 2Q15.

Pending Merger

St. Jude remains on track to completing its merger with Abbott by the end of Q4, analyst Toung mentioned. The deal is valued at about $85 per share of the company, to be paid in cash and Abbott stock. Due to the pending deal, St. Jude has withdrawn its financial guidance for 2016.

Standalone Assumptions

The adjusted EPS estimates for St. Jude on a standalone basis is $4.00 for 2016 and $4.30 for 2017.

“STJ shares are trading at 18.0-times our 2017 EPS estimate, slightly below the average multiple of 18.7 for our coverage universe of med-tech stocks,” Toung stated. He added that the Hold rating has been maintained due to the pending merger.

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