Medtronic (NYSE: MDT) today announced Street-beating third-quarter results, upping its full-year guidance amid continued momentum.
However, company officials also said that they have initiated significant expense reductions amid macroeconomic pressures, including a strong dollar and inflation.
The medtech giant’s next-gen Evolut FX TAVR system, fully launched in the U.S. in September 2022, helped drive the earnings beat. In addition, the Spine business saw its second quarter in a row of double-digit implant growth. Its spine technology ecosystem called Aible fueled the momentum. Medtronic unveiled the Able offering last year.
Also, the launch of the Micra AV in China provided the company a boost.
Medtronic earned $1.22 billion, or 92¢ per share, off $7.73 billion in revenue for the quarter ended Jan. 27, 2023. The results represented a bottom-line slide of 17% compared with the same quarter a year go. Sales were up slightly.
Adjusted to exclude one-time items, Medtronic had an EPS of $1.30. The result was 3¢ ahead of the consensus among Wall Street analysts, who expected EPS of $1.27 and sales of $7.53 billion.
An ‘urgency’ at Medtronic
Analysts have questioned in the past whether Medtronic leadership can execute on their ambitious plans to make the world’s largest medical device company more innovative and competitive. With the new momentum, company officials today repeated the word “urgency.”
“We are now moving quickly on a number of things,” CEO Geoff Martha explained during the earnings call. Initiatives include investing in and overhauling the company’s supply chain to make it more resilient. Medtronic is also divesting particular businesses, such as Patient Monitoring, Respiratory Interventions and Renal Care Solutions. Plus, the company continues to look for smart tuck-in acquisitions, such as its $1 billion acquisition of Affera and its combo pulsed-field and RF cardiac ablation system last year.
Delivering durable sales growth
Martha added during Medtronic’s news release: “I’m very encouraged by the rebound in our revenue growth, despite procedure volumes remaining a little softer in a few markets and volume-based procurement in China. We are confident in delivering durable revenue growth over the coming quarters as recent revenue headwinds continue to dissipate, and we drive execution across our businesses.”
Medtronic now expects organic revenue growth of 4.5% to 5.0% in the present quarter, which raises its full fiscal year organic growth outlook. In addition, the company boosted the lower end of its fiscal year 2023 diluted non-GAAP EPS guidance, It’s now from $5.28 to $5.30 versus the prior range of $5.25 to $5.30.
“As we look ahead, we are focused on delivering durable topline growth and significant expense reductions as we navigate through macro headwinds from foreign currency and inflation. And, we are committed to continued investment in our growth drivers to ensure long-term value creation,” said CFO Karen Parkhill.
Needham & Co. analysts kept their Hold rating on MDT shares. Senior research analyst Mike Matson said EPS growth in both FY24 and FY25 will likely be well below normal due to continued headwinds from currency and inflation and the Monitoring/Respiratory spin-off.
MDT shares were up slightly at $85.56 apiece by midday trading today. MassDevice‘s MedTech 100 Index, which includes stocks of the world’s largest medical device companies, was up more than 8%.
