Medtronic
(NYSE: MDT)
today reported fourth-quarter results that beat the consensus forecast on Wall Street amid accelerating revenue growth.
The world’s largest medical device company also announced an acquisition, planning to pay roughly $738 million for South Korea–based EOFlow and its EOFlow insulin delivery patch that a user can control using their smartphone.
However, its forecast for the new fiscal year came up short of The Street’s expectations.
Investors initially sent MDT shares down more than 5% this morning. By the afternoon, Medtronic stock was down more than 4% to $83.59 per share. MassDevice‘s MedTech 100 Index, which includes stocks of the world’s largest medical device companies, was down more than 1%.
“We had a strong finish to our fiscal year, with our fourth quarter top- and bottom-line results coming in ahead of expectations. Our accelerating revenue growth was broad-based, driven by procedure volume recovery, supply improvements, and innovative product introductions,” CEO Geoff Martha said in a news release. “We’re confident in delivering durable revenue growth in the year ahead as we drive execution across our businesses.”
Medtronic earned $1.19 billion, or 88¢ per share, off of $8.54 billion in revenue for the quarter ended April 28, 2023. GAAP EPS was down 20%. Revenue was up 5.6%.
Adjusted to exclude one-time items — including $300 million in revenue from an IP agreement with Edwards Lifesciences (NYSE: EW) — Medtronic’s EPS was $1.57. The result was a penny ahead of The Street, where analysts expected EPS of $1.56 and revenue of $8.25 billion.
Medtronic officials are trying to strike a balance
For the fiscal year ending in April 2024, Medtronic expects 4–4.5% revenue growth, implying revenue in the $32.0 billion–$32.3 billion range.
“Given it’s the start of the year, we think it’s prudent for you to model at the lower end of that range,” CFO Karen Parkhill told analysts during the company’s earnings call.
Medtronic also forecast adjusted EPS in the $5.00–$5.10 range for the year.
The Wall Street analyst consensus for the new year has been revenue of $32.28 billion and EPS of $5.20.
Parkhill later added: “We thought it was prudent to start the year with guidance that sets us up for success.”
There were no new details about the layoffs taking place at Medtronic amid significant cost reductions. Along with divestitures, boosted R&D spending and tuck-in acquisitions such as EOFlow, Medtronic seeks to refocus and drive growth.
U.S. companies in general are finding it more expensive to operate amid inflation, a strong dollar that makes it tougher to export, supply chain challenges and more. Medtech companies such as Medtronic have also had to navigate their health provider customers’ operational challenges and healthcare cost reduction efforts in China.
On the other hand, Martha told analysts today that he saw opportunities for Medtronic to reinvest in some of the top areas of medtech, including diabetes treatment tech, surgical robotics and pulsed-field ablation for treating atrial fibrillation (AFib).
Said Martha: “We’ve got to balance mitigating some of these headwinds with making sure that we’re making the right investments.”
Needham & Co. kept a Hold rating on MDT shares, with senior research analyst Mike Matson describing the guidance as “worse (more conservative?) than we expected.” With Medtronic moving forward with plans to spin off its patient monitoring and respiratory intervention businesses, Matson thought EPS growth in 2024-25 could also be below the company’s targeted high-single digits
Medtronic reported momentum in Q4
The forecast for the new fiscal year may have underwhelmed investors, but there were a number of bright spots in Medtronic’s fourth-quarter report:
- Medtronic in March announced that its PulseSelect pulsed-field ablation (PFA) system had strong safety and efficacy results in a pivotal trial. “We expect to be one of the first companies with a PFA catheter in the U.S. market,” Martha said.
- The company also received a CE Mark for the Affera mapping and ablation system, which enables physicians to toggle between radiofrequency and pulsed-field ablation during a procedure.
- Medtronic on May 1 announced FDA approval of its next-gen Micra AV2 and Micra VR2 leadless pacemakers. Micra pacemakers continue to post double-digit sales growth.
- Martha reported that the next-gen Evolut FX system is enabling Medtronic to grow its share of the U.S. transcatheter aortic valve replacement (TAVR) market.
- “We continue to have positive momentum with the rollout of our differentiated Hugo robotics system in international markets, and we’re making progress bringing Hugo to the U.S. as we execute our EXPAND Uro pivotal trial,” Martha said.
- Medtronic has turned to Nvidia to enable an AI Access platform to boost the GI Genius intelligent endoscopy module’s capabilities.
- Just one month ago, the company received FDA approval for its next-gen insulin delivery technology, the MiniMed 780G. The system is already seeing double-digit sales growth in Western Europe, and Medtronic officials are encouraged to see preorders in the U.S. already exceeding expectations.
