Medtronic Sales Fall Short

Medtronic Inc. reported first-quarter earnings that rose 13%, but shares fell 2% AH as sales came in shy of forecasts amid ongoing sluggishness in the U.S. market for implantable cardiac defibrillators [ICDs] and slower-than-expected sales in the neuromodulation business. “We continue to be cautious about the exact timing and degree of rebound of the U.S. ICD market,” President William A. Hawkins said on a conference call (full transcript). ICDs had been a hot market until rival Boston Scientific made several high-profile recalls in 2005. Earnings for the quarter were $675M ($0.59/share) on revenue of $3.13B, up from $599M ($0.51/share) on revenue of $2.90B a year ago. Excluding items, earnings were $711M ($0.62/share). Analysts had expected earnings of $0.62/share on revenue of $3.17M. Revenue grew as follows during the quarter: cardiovascular 8%, including coronary stents 27%, diabetes 23%, spinal 12%, neuromodulation 5%, and ear, nose and throat 13%. Thirty-eight percent of Medtronic’s revenue came internationally, where sales grew 16% to $1.179B, driven by double-digit revenue growth in all major geographic areas. Separately, the company said it has been informed by the FDA that an advisory panel will review its premarket approval application for the Endeavor drug-eluting stent in October. The company believes the stent could achieve monthly sales of $30M in the U.S. It also said it will partner with Bayer Group to co-market a new blood glucose meter for Medtronic patients outside the U.S., and distribute Johnson & Johnson’s LifeScan meter in the U.S. starting next year.

Sources: Press release, Dow Jones, MarketWatch, Reuters, AP
Commentary: Medtronic's Earnings Ahead of Expectations • Five Stock Picks from Robert H. Stovall
Stocks/ETFs to watch: MDT, BAY, JNJ. Competitors: BSX, STJ. ETFs: IHI, IYH

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