By Debra Sherman
(Reuters) - Medical device maker St. Jude Medical Inc said on Wednesday first-quarter profit rose as lower expenses outweighed a decline in sales but warned that full-year revenue will be hurt by foreign exchange effects.
Shares dropped 1.2 percent to $41.65 in mid-day trading.
Chief Financial Officer John Heinmiller said on a conference call that 2013 revenues will be reduced by about $90 million to $110 million from a year ago due to the negative effects of foreign exchange. It will cut earnings by 12 cents to 15 cents per share.
"They had a tough quarter with respect to revenue, but they did a great job of managing the bottom line," said Jeff Jonas, a portfolio manager at Gabelli Health and Wellness Trust Mutual Fund, which owns St. Jude shares.
First-quarter net earnings rose to $222 million, or 78 cents per diluted share, from $212 million, or 67 cents per diluted share, in the year-ago period.
Adjusted earnings were 92 cents per share. On that basis, analysts, on average, 91 cents per share, according to Thomson Reuters I/B/E/S.
Quarterly sales fell to $1.34 million from $1.40 million a year ago. The company said sales were hurt by the effects of changes in the euro and yen.
Chief Executive Dan Starks told a conference call the company lost share in the implantable heart pacemaker market in the latest quarter. However, he expects the trend to reverse as St. Jude, which competes against Medtronic Inc and Boston Scientific Corp, launches a series of new pacemakers this year.
He also expects sales of implantable heart defibrillators to improve and then stabilize through the remainder of the year. Defibrillators monitor and regulate heart rates via electrical shocks.
In a telephone interview, Heinmiller said all product launches and remediation efforts to resolve a U.S. Food and Drug Administration warning letter are "on track."
The FDA earlier this year warned the company about "serious violations" at its manufacturing facility in Sylmar, California, where the Durata and Riata leads for implantable defibrillators are made. Violations included a failure to validate testing methods.
He maintained the same optimism he had at the beginning of the year, when the company, which also makes heart valves and neurology products, reported 2012 results.
"We are still focused on accelerating our growth rate through 2013 and nothing that developed here in the first quarter changes the optimistic view," he said.
"There have been no delays in any of our timetables," he said, referring to a large number of new product launches that are expected to help boost revenue through the end of the year.
He said the U.S. market was starting to stabilize, but the volume of medical procedures remained lackluster.
Demand for medical devices in Europe remains "challenging" but have been fully factored into its financial forecast.
"It's not a surprise. It's the world we live in," he said.
St. Jude forecast second-quarter earnings to be between 93 cents and 95 cents per share, and 2013 EPS to be between $3.68 to $3.73. The consensus analyst estimate is 94 cents for the second quarter and $3.69 for the full year.
(Reporting by Debra Sherman; Editing by Jeffrey Benkoe)