Investors drove shares of Medtronic (NYSE:MDT) down on Wall Street this morning after the company narrowed its fiscal 2012 earnings guidance.
The declines came despite increased 3rd-quarter sales and earnings. The Fridley, Minn.-based medical device leviathan posted profits of $935 million, or 84 cents per share, on sales of $3.92 billion during the 3 months ended Jan. 27. That’s a bottom-line gain of 1.2% and a top-line increase of 1.6%, compared with Q3 2011.
“I am pleased that a majority of our business mix continued to report strong, consistent revenue growth in the upper single digits. However, this was masked by continued challenges in our U.S. ICD and Spine performance,” chairman & CEO Omar Ishrak said prepared remarks. “Stabilizing these businesses along with delivering on our key strategic imperatives of improving execution, optimizing innovation, and accelerating globalization should position us well to deliver long-term sustainable growth.”
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Medtronic maintained its guidance for sales growth between 1% and 3%, but “tightened” its earnings outlook for fiscal 2012, to between $3.44 and $3.47. Adjusted EPS, excluding 4 to 6 cents’ worth of dilution from its $800 million acquisition of Ardian, is now pegged at $3.48 to $3.51. Analysts on Wall Street are expecting adjusted EPS of $3.44.
“While this was a challenging quarter from a revenue perspective, I was encouraged by the management team’s ability to execute on delivering the bottom line,” Ishrak said. “We remain optimistic that long-term growth should improve as we dramatically expand our global footprint and focus on delivering economic value as well as clinical value to our customers.”
MDT shares were trading at $38.66, down 3.2% on the day, as of about 9:50 this morning.
ICD, spine businesses still flag
Medtronic’s cardiac rhythm management arm logged sales of $1.19 billion, down 2% (3% on a constant-currency basis), compared with Q3 2011, driven by a 9% constant-currency slide for its implantable cardiac defibrillator unit. The ICD business reported sales of $674 million; Medtronic attributed the weaker sales to declining procedure volumes in the U.S. Revenues from pacemaker devices were $467 million, up 3% on a constant-currency basis.
For Medtronic’s spine business, revenues were down 9% (10% on a constant-currency basis), to $784 million. Although international spine sales rose 7% to $229 million, in the U.S. sales were down 14.1% to $555 million. The decline was driven by a 20% slide for the biologics unit, driven by lower sales of its controversial Infuse bone morphogenetic protein.
Stents business Resolute on driving sales higher
Ishrak said the 510(k) clearance the FDA granted its Resolute drug-eluting stent last week “should contribute to improved revenue performance,” according to a press release. The company’s coronary unit reported sales of $382 million during the quarter, up 3.2% compared with Q3 2011.
Physio-Control gives a $112 million farewell gift
The Physio-Control business, which Medtronic sold to Bain Capital for $478 million after the quarter closed, contributed sales of $112 million, boosting the company’s overall top line to $4.03 billion. The automated external defibrillator business added $90 million to the adjusted bottom line, $75 million from divestiture-related items and another $15 million in after-tax income.
Here’s a look at how Medtronic’s Q3 2012 worldwide revenues shaped up, by business unit:
| Q3 FY2011 | Q3 FY2012 | % change | |
| CARDIAC RHYTHM DISEASE MANAGEMENT | $1,221 | $1,192 | -2.4% |
| Pacing | $450 | $467 | 3.8% |
| Defibrillation | $735 | $674 | -8.3% |
| AF & Other | $36 | $51 | 41.7% |
| CARDIOVASCULAR | $774 | $837 | 8.1% |
| Coronary | $370 | $382 | 3.2% |
| Structural Heart | $241 | $265 | 10.0% |
| Endovascular & Peripheral | $163 | $190 | 16.6% |
| CARDIAC & VASCULAR | $1,995 | $2,029 | 1.7% |
| SPINAL | $861 | $784 | -8.9% |
| Core | $626 | $596 | -4.8% |
| Biologics | $235 | $188 | -20.0% |
| NEUROMODULATION | $401 | $419 | 4.5% |
| DIABETES | $341 | $367 | 7.6% |
| SURGICAL TECHNOLOGIES | $259 | $319 | 23.2% |
| RESTORATIVE THERAPIES | $1,862 | $1,889 | 1.5% |
| TOTAL | $3,857 | $3,918 | 1.6% |
