Medtronic Inc. (NYSE:MDT) managed to post significant top-line gains despite a slight decline in first-quarter sales, largely due to a shorter start to fiscal 2011.
The Fridley, Minn.-based medical device monolith reported profits of $830 million, or 76 cents per diluted share, on sales of $3.77 billion during the three months ended July 30. That compares with profits of 445 million, or 40 cents per diluted share, on sales of $3.93 billion during the same period last year.
The fiscal 2011 first quarter was a week shorter than the year-ago period, depriving Medtronic of about $200 million in sales, according to a press release. The disparity in net income was due to $50 million in restructuring charges and $360 million in "certain litigation charges" incurred during Q1 2010, according to the release. Absent those expenses and $38 million worth of research & development, and acquisition costs and an adjustment to interest expenses, net income was $868 million (80 cents per adjusted, diluted share) for the just-ended quarter, a 5.0 percent increase over adjusted net income of $827 million (74 cents adjusted, diluted EPS) during Q1 2010.
International sales were flat at $1.54 billion, accounting for 41 percent of total sales. Chairman and CEO Bill Hawkins said a "softer global healthcare market," driven by lower utilization rates and increased pricing pressure, "made for a difficult first quarter."
Still, Hawkins said, some of Medtronic’s bread-and-butter divisions held their own, despite being offset by weaker-performing segments. Cardiovascular unit sales were $717 million for the quarter, up 4 percent. Sales for Medtronic’s diabetes unit rose 6 percent to $312 million and its surgical technologies segment posted sales of $235 million, a 4 percent increase.
Most other divisions were down, however, most notably its cardiac rhythm disease management business. Total CRDM sales were $1.23 billion, down 8 percent, largely driven by a 12 percent decline for Medtronic’s pacing systems unit and a 7 percent slide for its defibrillation systems business. Cardiac and vascular group sales dipped 5 percent to $2.03 billion, including a 13 percent decline for the Physio-Control subsidiary.
The results prompted Medtronic to lower its full-year sales and earnings guidance. The company said it expects sales growth of between 2 percent and 5 percent during fiscal 2011, down 3 percent from its previous forecast, with diluted EPS of between $3.40 and $3.48, down from $3.45 to $3.55.
MDT shares were trading at $34.99 during pre-market activity, down nearly 5 percent.