(Zacks Equity Research)–Of late, Medtronic plc‘s (MDT) spine business has been registering soft performance due to a challenging market scenario. Let us see if there is any possibility of a rebound this time around. The company is scheduled to report fourth-quarter and fiscal 2018 results before the opening bell on May 24.
Spine at a Glance
In the last reported quarter, Medtronic’s spine division was flat year over year. Despite a mid-single-digit growth in BMP (Bone Morphogenetic Protein) at CER, a low-single digit decline in Core Spine hampered overall sales.
However, the company noted that though growth was sluggish, it was in line with the global spine market. Per management, the combination of advanced technologies in imaging, navigation, powered instruments and nerve monitoring has spurred growth in this division. The company has also started to demonstrate positive outcome related to its distribution relationship with Mazor Robotics.
Nevertheless, since the beginning of fiscal 2018, Medtronic is suffering from significant pricing pressure in this business, which offset the strong procedural growth. The company believes that this price reduction basically stems from consolidations within hospitals. The company stated that hospitals are getting more sophisticated with their buying patterns and are consolidating their vendor base resulting in price declines.
Medtronic expects this competitive pricing pressure to reduce over the next couple of quarters leading to net procedural growth for the company. However, looking at the company’s outlook, we are uncertain of a near-term recovery. The company earlier noted that spine’s broader Restorative Therapies Group (RTG) segment growth may be marred by the impact of a slower spine market in the soon-to-be reported quarter.
What Did CEO Omar Ishrak said about Spine on Q4 2018 Results – Earnings Call Transcript?
“In Spine, we grew 1% better than the global market, which we estimate is slightly declining. We are seeing emerging strength in our differentiated spine products and procedures including high-single-digit growth in BMP and [OLUS] [ph], strong double-digit growth in Prestige LP Cervical Discs and strong customer adoption of our new SOLERA VOYAGER 5.5/6.0 fixation systems and ARTiC-L 3D printed titanium cage.In addition, when coupling our Spine revenue with the Spine enabling technologies that are reported, in our Neurosurgery business, our combined revenues grew 2.7%. We believe this is a more relevant comparison of our Spine results against our competition and an indication that our Surgical Synergy strategy is working and driving our overall growth in Spine Procedures”.
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