Medtronic
(NYSE: MDT)
officials have made important changes to boost earnings growth, and they’re excited about innovations such as pulsed field ablation (PFA) to treat atrial fibrillation (AFib).
During the medtech giant’s fourth-quarter earnings call today, CEO Geoff Martha and CFO Karen Parkhill discussed portfolio management moves such as shuttering Medtronic’s ventilators business, more discipline on headcount and expenses, and more use of automation and digitization.
“Our global workforce is embracing a performance-driven culture that is translating into durable results,” Martha said.
At the same time, Medtronic is making strategic investments in research and development to boost future growth. Said Parkhill: “I’ve talked about it being the one line item that’s allowed to grow in line or more than revenue and in certain years.”
Medtronic also announced more clinical studies of its Hugo robotic-assisted surgery system as it seeks to expand its indications and take on Intuitive in the soft-tissue surgical robotics space.
For the new fiscal year, Medtronic is forecasting organic revenue growth in the range of 4–5% and adjusted EPS growth of 4–6% ($5.40–5.50).
“As our currency headwinds abate, we expect high-single-digit actual or reported EPS in the back half of the year,” Parhill said.
The company also boosted its quarterly dividend to 70¢ per share, marking the 47th consecutive year that the 75-year-old company has increased its dividend.
“We’re at the beginning stages of new product cycles. The runway from the differentiated technologies we’ve recently launched, along with the innovation we will watch over the next 12 months, gives me significant confidence in our ability to drive durable growth,” Martha said.
Truist analysts’ initial reaction was that EPS guidance generally matched what they believed were already low investor expectations for the initial EPS growth.
Ryan Zimmerman and Iseult McMahon at BTIG said: “If growth is better in [the second half of fiscal 2025], we think shares can move higher but that will require some patience until then.”
Investors appear to have wanted to see more. MDT shares were down nearly 4%, to $82.54 apiece, by midday trading today. MassDevice‘s MedTech 100 Index was down slightly.
Medtronic has a Street-beating Q4
Medtronic earned $659 million, or 49¢ per share, off of $8.59 billion in sales for the quarter that ended April 26, 2024. Earnings were less than half what they were during the previous Q4, while revenue was up slightly.
Adjusted to exclude one-time items, Medtronic’s EPS was $1.46. The result was a penny ahead of the consensus of Wall Street analysts, who expected EPS of $1.45 and revenue of $8.44 billion.
Medtronic officials said the company achieved 130 product approvals in the last 12 months in key geographies. Recent developments they’re especially excited about include:
- In December, the company’s PulseSelect PFA system became the first PFA system approved by the FDA to treat paroxysmal and persistent AFib. The company also recently reported positive clinical trial data for its Affera mapping and ablation system with the Sphere-9 catheter that can toggle between PFA and RF during a procedure. “PFA is going to be a big one for us,” Martha said.
- Medtronic in March announced the approval of its next-generation Evolut FX+ transcatheter aortic valve replacement (TAVR) system. “We have just started the limited launch now and are receiving really strong positive feedback from physicians. A full market release is expected in August,” Martha said.
- The company said in March that it secured FDA approval of its Percept RC deep brain stimulation system, which it described as the first DBS sensing-enable rechargeable device to treat movement disorders such as Parkinson’s disease. “We’re seeing strong uptake and excitement for this exclusive technology, and it’s extending our number one leadership position in DBS in both Europe and in the U.S.,” Martha said.
- The company has launched its next-gen Micra AV2 and Micra VR2 leadless pacemakers, which were approved a year ago. Martha said major private insurer UnitedHealth Group recently updated its policies to cover leadless pacemakers.
- Martha expected significant progress in the upcoming year when it came to securing coverage and payments for the company’s FDA-approved Simplicity Spyral renal denervation technology to treat hypertension.
“We delivered a strong finish to the fiscal year, with broad strength across our businesses and each of our four segments posting mid-single digit or higher organic revenue growth,” Martha said. “Our momentum is building into the new fiscal year. We’re beginning new product cycles in some of medtech’s most attractive markets, which is further enhanced as we apply AI across our portfolio. We are very optimistic about what we can achieve in fiscal ’25 and beyond.”
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