Insiders Are Selling St. Jude Medical

Oct.14.13 | About: St. Jude (STJ)

In this article, I will feature one medical device company that has seen intensive insider selling during the last 30 days. Intensive insider selling can be defined by the following three criteria:

  1. The stock was sold by three or more insiders within one month.
  2. The stock was not purchased by any insiders in the month of intensive selling.
  3. At least two sellers decreased their holdings by more than 10%.

St. Jude Medical (NYSE:STJ) develops, manufactures, and distributes cardiovascular and implantable neurostimulation medical devices worldwide.

Click to enlarge

Insider selling during the last 30 days

Here is a table of St. Jude Medical's insider-trading activity during the last 30 days by insider.

Name Title Trade Date Shares Sold Rule 10b5-1 Current Ownership Decrease In Ownership
Michael Rousseau Group President Oct 3-4 171,000 Yes 20,382 shares 89.4%
Denis Gestin President Oct 3-4 137,000 Yes 6,257 shares 95.6%
Donald Zurbay CFO Oct 4 12,000 Yes 9,731 shares 56.7%
Click to enlarge

There have been 320,000 shares sold by insiders during the last 30 days. More details about the Rule 10b5-1 trading plan can be found from this link.

Insider selling by calendar month

Here is a table of St. Jude Medical's insider-trading activity by calendar month.

Month Insider selling / shares Insider buying / shares
October 2013 320,000 0
September 2013 4,200 0
August 2013 24,600 0
July 2013 171,922 0
June 2013 0 0
May 2013 10,870 0
April 2013 15,072 0
March 2013 0 0
February 2013 217,343 0
January 2013 6,958 0
Click to enlarge

There have been 770,965 shares sold and there have been zero shares purchased by insiders this year. The month of October has seen the most insider selling.

Financials

St. Jude Medical reported the second-quarter financial results on July 17, with the following highlights:

Revenue $1.4 billion
Net income $115 million
Cash $1.2 billion
Debt $3.6 billion
Click to enlarge

Outlook

As of July 17, St. Jude Medical expects its consolidated net earnings for the third quarter of 2013 to be in the range of $0.88 to $0.90 per share and for full-year 2013 consolidated net earnings to be in the range of $3.70 to $3.73, increasing the lower end of the range by $0.02.

Competition

St. Jude Medical's competitors include Boston Scientific Corporation (NYSE:BSX), Edwards Lifesciences (NYSE:EW), and Medtronic (NYSE:MDT). Here is a table comparing these companies.

Company STJ BSX EW MDT Industry Average (Medical Appliances & Equipment)
Market Cap: 15.84B 15.94B 8.31B 54.85B 84.56M
Employees: 15,000 24,000 8,200 46,659 244.00
Qtrly Rev Growth (yoy): -0.01 -0.01 0.07 0.02 0.16
Revenue: 5.44B 7.12B 1.97B 16.66B 54.31M
Gross Margin: 0.73 0.66 0.75 0.75 0.56
EBITDA: 1.74B 1.63B 519.70M 5.64B 1.80M
Operating Margin: 0.27 0.13 0.23 0.29 -0.01
Net Income: 634.00M -827.00M 399.30M 3.56B N/A
EPS: 2.12 -0.61 3.42 3.47 N/A
P/E: 26.06 N/A 21.63 15.85 25.63
PEG (5 yr expected): 1.63 2.25 1.63 2.20 1.59
P/S: 2.91 2.24 4.21 3.29 2.69
Click to enlarge
Click to enlarge

St. Jude Medical's P/S ratio is above the industry average.

Here is a table of these competitors' insider-trading activities this year.

Company Insider buying / shares Insider selling / shares
BSX 30,000 632,431
EW 6,000 497,668
MDT 4,800 466,277
Click to enlarge

Only St. Jude Medical has seen intensive insider selling during the past 30 days.

Conclusion

There have been three different insiders selling St. Jude Medical and there have not been any insiders buying St. Jude Medical during the past 30 days. All three of these insiders decreased their holdings by more than 10%. St. Jude Medical has an insider ownership of 0.10%.

There are 11 analyst buy ratings, nine neutral ratings, and four sell ratings with an average price target of $53.72. St. Jude Medical is trading at a P/E ratio of 26.06 and a forward P/E ratio of 13.90. The company has a book value of $13.52 per share and the stock has a dividend yield of 1.81%.

Before entering short St. Jude Medical, I would like to get a bearish confirmation from the Point and Figure chart. The two main reasons for the proposed short entry are bearish analyst price targets and the intensive insider selling activity.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.