Medtronic (NYSE:MDT) defied Wall Street’s expectations for its fiscal second quarter despite sluggish performances from its two leading divisions.
Share prices are up nearly 5 percent today after the world’s largest pure-play medical device maker reported strong second-quarter results, posting profits of $871 million, or 82 cents per share, on sales of $4.13 billion during the three months ended Oct. 28.
That’s a bottom-line boost of 53.9 percent and a 5.9 percent addition to the top line, compared with the same period last year.
Adjusted to exclude one-time items, EPS was 84 cents per share, two cents above The Street’s consensus.
MDT shares were trading at $34.87 as of about 2:20 p.m. today, up 4.8 percent.
The Twin Cities colossus confirmed its outlook for the rest of fiscal 2012, saying it expects sales growth of between 1 percent and 3 percent for the rest of the year and adjusted EPS growth of 6 percent to 9 percent.
Heart business softens, spine biz declines
Medtronic posted the unexpected results despite softness in its two core businesses, cardiac rhythm management and spine – which together accounted for more than 50 percent of its total Q2 revenues. CRDM revenues were up 1.6 percent to $1.27 billion for the quarter, but defibrillator sales slid 5.0 percent to $708 million.
Now that the results are in from the industry three largest CRM players (Medtronic, Boston Scientific (NYSE:BSX) and St. Jude Medical(NYSE:STJ), that’s likely to be taken as a sign on The Street that the CRM slump isn’t over yet. Q3 CRM sales fell 8.5 percent to $503 million for BSX; STJ reported Q3 ICD and pacemaker sales of $751 million, up 2 percent.
The spine unit saw revenues decline 1.3 percent to $839 million, driven by a 3.7 percent decline in its spinal biologics business. Ishrak told Reuters that the 16 percent sales slide for its Infuse bone morphogenetic protein, driven by a series of controversies over its safety, is something the company is keeping a close eye on.
“We are watching this carefully and remain cautious,” he told the news service, adding that Medtronic is waiting for the results of a company-sponsored re-evaluation of the controversial infuse data by Yale researchers.
The company will take its cues from that review “irrespective of financial consequences,” he said. “We believe [Infuse] is safe – that data already has been reviewed by FDA. … Off-label use is something we do not promote. If we need further studies to clarify something, that’s what we’ll do.”
Physio-Control shows no fizz
Private equity giant Bain Capital may believe that MDT’s automated external defibrillator unit, which it paid $487 million for earlier this week, is “impressive market leader,” but Physio-Control posted sales of $109 million for the quarter – exactly as much as it logged during Q2 2011.
But don’t look for Medtronic to unload any other businesses anytime soon. Ishrak told CNBC that “the rest of our portfolio, while we examine it periodically, right now we think there’s considerable synergies between the business units. The different business units are better as part of Medtronic and we’re in a position to win in all of them.”
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