1 Industry a Heartbeat Away From Disaster: Medtronic, Inc. (MDT), St. Jude Medical, Inc. (STJ)

It doesn’t help that regulators and lawmakers have turned their attention to pacemakers and ICDs in recent times as well. The Department of Justice has already eyed the overuse of ICDs, particularly in patients who don’t medically require an implanted device. The Centers for Medicare and Medicaid Services also launched an audit last year over the implementation of pacemakers. While all the oversight may not lead to any serious regulatory changes, the Millennium Research Group predicts that it could reduce procedural growth in coming years — which is not what companies in the CRM area want to hear.

So, how should you play this business? Companies in the field have been looking recently to shift away from relying on CRM sales. Boston Scientific has fueled its growth in less sales-heavy businesses, such as neuromodulation and women’s health. St. Jude also has pushed for growth n other divisions, and the company predicts that 2013 will be its first year that CRM revenue will make up less than 50% of total yearly sales.

St. Jude has predicted a good year ahead, and Boston Scientific’s better-than-expected fourth quarter could be the turnaround sign investors have long waited for. However, your best bet out of the companies most involved in the CRM business is Medtronic. It’s not as much a growth candidate as the other two, but it’s a stable company that only relies on around 30% of its revenue in CRM sales.

Boston Scientific also doesn’t rely too heavily on CRM, but its largest business — interventional cardiology — is also seeing sales on the decline. I believe this company’s ultimately headed in the right direction, but keep an eye on it to see whether it can sustain this quarter’s momentum. If Boston Scientific can slow or stem its losses in its CRM and interventional cardiology departments while investing more into its higher-growth segments, it’ll be firmly on the right track to long-term success.

Not the market you’re looking for
In all, the CRM market isn’t the high-growth industry investors want to see. With a mature market and sales falling around the industry, don’t expect the companies most involved here to turn falling sales into growth any time soon. That doesn’t mean that firms like Boston Scientific and Medtronic are bad investments, however — it simply means they need to focus more on higher-growth businesses while maintaining or growing market share in the CRM space. If they can’t fuel growth in other areas, however, these companies could be in for a rough future.

The article 1 Industry a Heartbeat Away From Disaster originally appeared on Fool.com and is written by Dan Carroll.

Fool contributor Dan Carroll has no position in any stocks mentioned. The Motley Fool owns shares of Medtronic.

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