- Medtronic on Tuesday said first-quarter profit exceeded its prior projections on strong sales of its diabetes devices and transcatheter heart valves.
- The company’s cardiac and vascular business posted a 6% increase in sales, while the diabetes business saw sales jump 27%.
- Dublin-based Medtronic raised its forecasts for full-year fiscal 2019 organic revenue and earnings per share growth, based on the strong first-quarter performance. The CEO also addressed tariffs and acquisitions on its earnings call.
Medtronic has now recorded its third straight quarter of revenue growth at 6.5% or better, CEO Omar Ishrak told analysts on a conference call. “Businesses that were challenged 12 months ago are now headed in the right direction,” the CEO said.
Demand for Medtronic’s artificial pancreas, the world’s first device that monitors blood glucose and administers insulin, led growth in the diabetes business. Sales of the MiniMed artificial pancreas have been gaining momentum this year after a slow start due to production issues when the device was first approved in September 2016.
Diabetes device sales soared 27% to $572 million, further supported by demand for the company’s insulin pumps.
In the cardiac and vascular group, sales climbed 6% to $2.81 billion, bolstered by strong global growth in minimally invasive transcatheter heart valves, as well as demand for left ventricular assist devices for heart failure and products to treat atrial fibrillation, a form of irregular heart rhythm.
Sales in the coronary and structural heart business, which includes valves, alone increased 12% to $917 million.
Overall, net income rose to $1.08 billion, or 79 cents a share, in the quarter ended July 27, from $1.02 billion, or 74 cents a share, the year before. Profit growth reflected better-than-expected revenue and boosts from favorable foreign currency fluctuations and a tax benefit, company officials said.
Revenue was $7.38 billion, down from $7.39 billion, due to the divestiture of the patient care, deep vein thrombosis and nutritional insufficiency businesses to Cardinal Health in the second quarter of fiscal 2018. On an organic basis, first-quarter revenue increased 6.8%.
Medtronic boosted its organic revenue growth forecast for fiscal 2019 to a range of 4.5 to 5.0% from 4.0 to 4.5%. It increased its forecast for earnings per share growth in fiscal 2019 to a range of 9 to 10% from 8 to 9% on a constant-currency basis. On the conference call, Medtronic CFO Karen Parkhill said the company is comfortable with the upper end of the revised range.
Medtronic continues to see double-digit growth for its products in emerging markets. Ishrak, responding to a question about the impact of trade tariffs, said the company expects to offset any pressures in that area due to strong demand across a range of geographies. “Overall, it’s a modest impact, and one that we feel we can cover,” Ishrak said.
On the subject of acquisitions, the CEO said the company remains focused on tuck-in deals. “You’ll see activity from us,” Ishrak said. "Certainly our eyes are wide open as far as what’s available out there.”
The company is also making progress on its cost-reduction initiatives, he said. In January, Medtronic launched a restructuring plan targeting $500 million to $700 million in annual savings over the next five years.