UPDATED Nov. 20, 4:15 p.m., with comment from CEO Omar Ishrak, share price data
UPDATED Nov. 20, 9:30 a.m., with details on business segment results.
The world’s largest pure medtech player managed to meet Wall Street’s profit expectations despite a $245 million charge to cover "certain litigation" in its structural heart business that pushed earnings down more than 25%.
The Fridley, Minn.-based medical device company posted profits of $646 million, or 63¢ per share, on sales of $4.10 billion during the 3 months ended Oct. 26, representing a 25.8% profit slide on sales growth of 1.8%.
Excluding the 1-time charge, adjusted earnings per share reached 88¢, as expected by the boffins on The Street.
MDT shares closed the trading day at $42.66, up 2.0%.
Medtronic boosted its sales outlook for fiscal 2013, saying it now expects revenue growth of 3% to 4%, up from 2% to 4% previously, and reaffirmed its full-year earnings guidance of $3.62-$3.70 per share.
Notwithstanding the raised expectations, chairman & CEO Omar Ishrak called the Fridley, Minn.-based medical device company’s guidance "conservative," citing uncertainty stemming from the financial crisis in Southern Europe and new healthcare policies coming online in the U.S. next year, including the medical device tax.
"I think there is some conservatism regarding the environment. We obviously intend to drive growth as aggressively as we can and – but, look, there’s all kinds of headwinds. Western Europe, for example, has a lot of uncertainty built around Southern Europe, and there’s a fair amount of pricing pressure in some of these markets," Ishrak told analysts during a conference call today. "In the U.S., we’re going to get through the end of the year, and the policy implications that will be put in to place and again, there’s uncertainty there.
"With respect to the med-tech tax, previously, we’ve maintained our position that it’s something that we would like repealed if possible. And we’ve worked with other medtech leadership in supporting them. However, we really like to focus on things that we can control. Right now, that’s what the law is, that’s what the projection is going to be. And you can assume that that’s going to come into play," he added. "And hence, we’ve built our plan, assuming that the medical device tax will come into play in January, we’ve potentially got $50 million or so that we’re going to manage through the balance of the year, of the fiscal year for us. And it’s, like we’ve stated before, it’s something between $125 million to $175 million a year that we’ve got to manage."
Sales for Medtronic’s largest business, cardiac rhythm management, slid 2.2% to $1.23 billion for the quarter. Cardiovascular sales plunged 15.6% to $717 million; spine segment revenues were up 0.5% to $829 million.