UPDATE: Medtronic 1Q Net Down 38% On Charges; Outlook Steady
25 Agosto 2009 - 6:46PM
Dow Jones News
Medtronic Inc.'s (MDT) fiscal first-quarter profit tumbled 38%,
weighed down by charges from a recent legal deal, but the big
medical-devices maker's core earnings and sales beat expectations
with help from extra time on the fiscal calendar.
Shares still slipped early Tuesday and were recently down 37
cents to $37.63, after the company said it's not improving its
full-year guidance despite the first-quarter performance. The bar
was also set high ahead of Tuesday's report, analysts noted,
because Medtronic shares have risen sharply in recent months,
climbing nearly 56% between an early March slump and Monday's
close.
The Minneapolis-based company has been battling to stabilize its
position in key markets - for implantable heart defibrillators and
spinal devices - where it has endured turbulence due to a range of
issues. While the impact of an extra week of selling time muddies
the waters, analysts saw some progress on this front.
"From our perspective, here's a quarter where things got
better," said Aaron Vaughn, an analyst with Edward Jones.
For the period ended July 31, Medtronic's profit dropped to $445
million, or a 40 cents a share, from $723 million, or 64 cents a
share, a year earlier.
Excluding 39 cents in charges, mainly pegged to $360 million in
after-tax charges from Medtronic's recent deal with Abbott
Laboratories (ABT) to resolve their patent fights, earnings rose to
79 cents from 72 cents. Analysts surveyed by Thomson Reuters had
forecast earnings of 78 cents a share, on average.
Sales also came in ahead of expectations by rising 6% to $3.93
billion. Sales were up 10% when a negative hit from foreign
currency rates is excluded.
It isn't clear how extra selling time on Medtronic's fiscal
calendar affected specific businesses, but the company estimated
the time added about five percentage points to the overall
currency-excluded 10% sales-growth tally.
That suggests first-quarter performance was more in line with
the company's unchanged forecast for 5% to 8% sales growth this
year, excluding currency. The company also maintained its forecast
for fiscal 2010 earnings of $3.10 to $3.20 per share.
With just one quarter of the fiscal year over, Medtronic decided
to hold its financial forecasts in check for now. The company had a
"solid" fiscal first quarter, but it's hard to predict trends in
the summer months of the second quarter, Gary Ellis, Medtronic's
chief financial officer, said on a conference call Tuesday.
Among top businesses, first-quarter sales of implantable
cardioverter defibrillators, or ICDs, crept up 1.4% to $775
million. This was in line with Wall Street expectations, according
to some analysts.
Medtronic remains by far the biggest company in the $6 billion
global market for ICDs, which shock hearts to stop potentially
deadly rhythm problems. But Medtronic's market share suffered
following the October 2007 recall of faulty Sprint Fidelis wires,
or "leads," which connect ICDs to the heart.
William A. Hawkins, Medtronic's chairman and chief executive,
said in an interview that ICD sales grew in a mid-single-digit
range excluding currency, suggesting Medtronic's market share
remained relatively stable. On the call, he said the company
continues to expect the global ICD market will grow at this
rate.
The company's business for spinal implants has been challenged,
meantime, by sluggish performance in the Kyphon business acquired
in late 2007, plus a Food and Drug Administration safety notice
from last summer regarding serious complications when Medtronic's
"Infuse" bone-growth product is used in neck vertebrae.
Spinal sales that grew 7% in the recent quarter, or 8% excluding
the currency impact, still expanded slower than the overall market.
But analysts noted some improvement there, at least, with the pace
of sales growth picking up since the fiscal fourth quarter,
although the extra selling week added some confusion.
Infuse sales were $219 million, down slightly from a year ago.
Because the company has now lapped the FDA's July 2008 safety
notice, year-over-year Infuse comparisons could become easier from
here.
Elsewhere in the business, Cardiovascular sales rose 9%, or 15%
excluding currency, helped by the recent rollout of Medtronic's
"Endeavor" drug-coated heart stent in Japan.
-By Jon Kamp, Dow Jones Newswires; 617-654-6728;
jon.kamp@dowjones.com
(Mike Barris contributed to this report.)