Medtronic Sales Underperform In Q2, Sending Stock To 9-Month Low

Medtronic Sales Underperform In Q2, Sending Stock To 9-Month Low

Sales of drug-eluting stents, insulin pumps and other products didn’t grow at the pace Medtronic expected, sending the company’s revenue below its own expectations.

Medtronic CEO Omar Ishrak called his company’s sales performance during its fiscal second quarter “disappointing,” leading the medical device maker to cut its outlook for the rest of the year.
 
Medtronic shares plummeted more than 9 percent to $73.20 on Tuesday morning, sending the company’s stock to its lowest valuation in over nine months.
 
“We faced issues that affected our growth, including slower than expected revenue as we await new product introductions, particularly in [our Cardiac and Vascular Group] and Diabetes,” Ishrak said in a statement.
 
Medtronic, which maintains its U.S. operational headquarters in Fridley, downsized its full-year guidance from earnings per share of $4.60 to $4.70 to a new outlook of $4.55 to $4.60. Full-year sales guidance was also lessened from growth in the upper half of the mid-single-digit range on a constant currency basis to growth in just the mid-single digit range.
 
Revenue for the three-month period ending October 28 totaled $7.35 billion, up 4 percent from a year ago, although short of Wall Street’s estimation by about $160 million. Medtronic reported a 6 percent growth from last year in its adjusted net income, which came out to $1.56 billion. Its diluted earnings per share of $1.12, a 9 percent year-over-year rise, beat Wall Street expectations by a penny.
 
“Despite the revenue shortfall, we produced a strong improvement and operating margins and double digit constant currency earnings per share growth,” Ishrak said.
 
Sales in the company’s Cardiac and Vascular Group once again led its four sales divisions. A look at how Medtronic’s core four sales divisions performed in the second quarter is as follows:

Group Q2 2017 Revenue
(in millions)
Q2 2016 Revenue
(in millions)
Difference
Cardiac and Vascular $2,584 $2,488 3.9%
Cardiac rhythm and heart failure $1,400 $1,324 5.7%
Coronary and structural heart $753 $754 -0.1%
Aortic and peripheral vascular $431 $410 5.1%
       
Minimally Invasive Therapies $2,473 $2,356 5%
Surgical solutions $1,361 $1,291 5.4%
Patient monitoring and recovery $1,112 $1,065 4.4%
       
Restorative Therapies $1,826 $1,764 3.5%
Spine $663 $649 2.2%
Brain therapies $506 $475 6.5%
Specialty therapies $369 $347 6.3%
Pain therapies $288 $293 -1.7%
       
Diabetes $462 $450 2.7%

“While some of the challenges that affected revenue in Q2 could persist in the near term,” Ishrak said, “we remain confident in our ability to deliver mid-single digit constant currency revenue growth and double-digit constant currency [earnings per share] growth, not only in our current fiscal year, but on a sustained basis into the future.”