Robust product pipelines in the medical device market help to alleviate continuing pricing pressure in the sector as signs of increased stabilization in the utilization environment are a major focus for investors, says Kristen M. Stewart, Director and Senior Company Research Analyst at Deutsche Bank Securities Inc.
“Pipelines continue to be very important for this sector,” she said. “New products help these companies get pricing premiums. They help expand markets, and certainly they are very important to the success of any company and stock.”
Stewart has a “buy” rating on St. Jude Medical, Inc., (STJ) partly due to its strong product pipeline. She says the pipeline should help offset the challenges STJ may see with its cardiac-rhythm management business, because the end markets are mature.
“And we think that they can sustain growth in the mid-to-high single digits on the top line, with leverage to get to double-digit EPS growth. We think they should be able to get there even in 2013, despite the device tax, due to restructuring savings they should recognize beginning next year,” Stewart said.
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