Medtronic
(NYSE: MDT)
shares ticked up today on first-quarter results that came in ahead of the consensus forecast.
The company reported growth stemming from its Diabetes and Cardiac Rhythm business units, while it also reported sustained progress with its Hugo surgical robot.
Shares of MDT rose 3.6% at $84.55 apiece in early-morning trading today. MassDevice’s MedTech 100 Index — which includes stocks of the world’s largest medical device companies — was down slightly.
The medtech giant posted profits of $791 million. That equals 59¢ per share on sales of $7.7 billion for the three months ended July 28, 2023.
Medtronic recorded a 14.9% bottom-line slide on sales growth of 4.5%.
Adjusted to exclude one-time items, earnings per share totaled $1.20, landing 9¢ ahead of Wall Street expectations. Sales also topped the forecast as analysts projected $7.6 billion in revenue.
“We are pleased with the strong start to our fiscal year. We executed and delivered another quarter of mid-single-digit revenue growth. Our solid results were broad-based, with each of our four segments delivering 6% organic revenue growth,” said Geoff Martha, Medtronic chair and CEO. “We also continue to make great strides on our comprehensive transformation designed to ensure durable growth and create value for shareholders.”
How the business units performed
Highlights included the U.S. launches for the MiniMed 780G automated insulin delivery system and the Micra AV2 and VR2 leadless pacemakers. The MiniMed launch led to 6.8% revenue growth year-over-year for Medtronic Diabetes, while Cardiovascular saw 5.5% growth.
Medtronic said its Micra systems produced mid-teens growth, while other Cardiac Rhythm offerings offered mid-single-digit increases. The company reported low-double-digit growth in Structural Heart on continued Evolut FX TAVR adoption. Drug-coated balloons and superficial vein therapy systems led to low-double-digit growth for Coronary and Peripheral Vascular.
Medical Surgical saw its revenues tick up 5.5% Surgical and Endoscopy sales ticked up thanks to growth in Advanced Surgical Technologies and Endoscopy on a continued supply improvement. The unit also drove growth for its installed base of Hugo robots. Medtronic reports new site activations in its Expand URO U.S. pivotal trial, which “continues to progress to plan.”
On the company’s earnings call, Martha said Medtronic sees Hugo as “a meaningful growth driver” in the years ahead.
“I like the setup and the competitive dynamics going forward over the next couple of years,” Martha said. “We got two major competitors, one with a robot, one without. And we’re feeling pretty good about where we are with Surgery.”
Neuroscience sales increased 4.9% year-over-year. Cranial and Spine Technologies growth was attributed to strength in its Aible ecosystem, double-digit growth in Mazor robotics and further growth in StealthStation navigation. Additionally, Medtronic received CE Mark approval for its next-generation Inceptiv spinal cord stimulator with closed-loop sensing.
Medtronic continues business separations, increases its 2024 guidance
The only revenue declines came as “Other,” at 80%. That stems from business separations, including Renal Care Solutions. It also relates to ongoing manufacturing agreements with Cardinal Health from the divestiture of Patient Care, Deep Vein Thrombosis and Nutritional Insufficiency. Foreign currency translation resulted in an unfavorable $43 million impact on the remaining segments.
The company now projects organic revenue growth of 4.5%, compared to a prior range of 4% to 4.5%. Medtronic raised its adjusted EPS guidance at both ends from a previous range of $5 to $5.10. It now projects between $5.08 and $5.16 for a 7¢ increase at the midpoint. That falls in line with the company’s operational EPS outperformance in the first quarter.
“Our revenue outperformance and focus on expense management drove operating margin expansion and mid-single digit adjusted earnings growth this quarter,” said Karen Parkhill, Medtronic EVP & CFO. “Given our first quarter performance, including a 7-cent operational beat on the bottom line, and improved fundamentals, we’re raising our full-year organic revenue growth and EPS guidance.”
The guidance raise is garnering a more positive response from investors than the company’s previous projections three months ago, which one analyst at the time described as more conservative than expected.
David Rescott, senior research analyst at Baird, described Medtronic’s Q1 beat and guidance raise as a positive but not necessarily a standout considering that large-cap medtech companies are seeing top and bottom-line beats across the board.
In addition, Mike Matson at Needham & Co. thought that Medronic’s fiscal year 2025 EPS growth could also be below its targeted high-single digits due to the company’s planned patient monitoring and respiratory intervention spin-offs.
Related: Pay drops for Medtronic CEO and the median employee; bonus plan changes
