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Medtronic Beats Analyst Expectations Despite 25 Percent Drop In Q3 Profits

Medtronic Beats Analyst Expectations Despite 25 Percent Drop In Q3 Profits

The medtech company reported mid-single digit sales growth in all four of its business groups.

Shrinking margins and a strong U.S. dollar ate away at Medtronic PLC’s third quarter profits, which fell 25 percent year-over-year, the company said Tuesday.
 
The world’s largest medical device company’s operating margin—a key measure depicting how much revenue is left over after production costs—fell from 19.5 percent a year ago to 15.7 percent most recently during the three-month period ending January 27, 2017. Profits for the quarter totaled $821 million, or 59 cents a share, after Medtronic took a $40 million hit from foreign currency exchange rates.
 
Yet, when excluding the impact of foreign currency translations, Medtronic surpassed Wall Street’s expectations. On that basis, earnings per share rose in its third quarter from $1.06 last year to $1.12. Analyst predictions were a penny less.
 
Revenues totaled $7.28 billion for the quarter, a 5 percent increase from the prior year, as all four of Medtronic’s business groups reported annual sales growth.
 
Its minimally invasive therapies group, in particular, benefited from over 50 new product launches during the quarter, Medtronic CEO Omar Ishrak said during a conference call with analysts on Tuesday.
 
“What we’re really excited about is that we expect that momentum to continue in terms of product launches in [the fourth quarter] and we have a good pipeline into next year,” Ishrak added. “We’ve got the Micra, the smallest pacemaker, which no one else has and it recently got reimbursement… So just in the cardiac rhythm space, we’ve got ammunition against our competitors.”
 
Additionally, Ishrak said he would not speculate on rumors that Medtronic was looking to spin off part or all of its medical supplies business. Bloomberg reported the claim at the start of February, citing sources that alleged the unit could sell for as much as $5 billion.
 
Instead, Ishrak said the company considers a number of questions—such as what value the business provides to Medtronic and vice versa—when contemplating potential deals.
 
Looking ahead to the final quarter of its fiscal year, the company reiterated its full-year outlook of mid-single digit percent sales growth and a double-digit percent rise in its earnings per share.
 
Investors reacted positively to the quarter as Medtronic stock rose 2 percent during Tuesday trading.