Medtronic’s Profit Rises

Medtronic Inc.’s  fiscal-fourth-quarter earnings rose 28% as the medical-device maker reported fewer charges but continued to face challenges in key heart- and spinal-device markets.Chairman and Chief Executive Omar Ishrak pointed to new products and the company’s growth in emerging markets, where revenue climbed 20% excluding currency fluctuations.Medtronic has been battling sluggish sales in recent quarters in its heart-rhythm and spine segments, which is more than half its business. In the latest quarter, revenue from implantable cardioverter defibrillators declined 1% excluding currency impacts, while spinal revenue was off by 6%.The company said the U.S. market for implantable defibrillators was stabilizing. Demand for the devices, which deliver a shock to the heart when needed, has been hurt by a U.S. Department of Justice investigation and a negative medical journal article last year. U.S. sales of Medtronic defibrillators totaled $417 million, up 5% from the last quarter but down 2% from the year-earlier period.
On the company’s earnings conference call, Mr. Ishrak said he was pleased the Justice Department has closed its investigation of Infuse, the company’s controversial product used in spinal-fusion procedures. Yale University researchers are conducting an independent assessment of Infuse.Until the company knows the results of that study, expected in the fall quarter, “there will be uncertainty surrounding our Infuse results,” Mr. Ishrak said. In the latest quarter, revenue in the biologics segment fell 16% to $189 million on a decline in Infuse sales.For the quarter ended April 27, Medtronic reported a profit of $991 million, or 94 cents a share, up from $776 million, or 72 cents a share, a year earlier. Excluding litigation-settlement charges, restructuring charges and other items, per-share earnings rose to 99 cents from 90 cents.Revenue increased 3.1% to $4.3 billion, or 4% excluding currency impacts.Analysts polled by Thomson Reuters projected earnings of 98 cents a share on revenue of $4.23 billion.
“This was a good quarter in our view, particularly given last quarter’s disappointing results,” said Michael Matson, analyst at Mizuho Securities. He added that improvement in the defibrillator market could be positive for competitors Boston Scientific Corp.BSX -0.51% and St. Jude Medical Inc. STJ -0.15%
Gross margin fell to 75.6% from 75.8%.For the fiscal year, the company projected per-share earnings of $3.62 to $3.70 on revenue growth of 2% to 4% on a constant-currency basis. Analysts polled by Thomson Reuters recently expected earnings of $3.66 a share and revenue growth of 1% to $16.53 billion.
Source:Anjali Athavaley.http://online.wsj.com.Tess Stynes contributed to this article.