Medtronic earnings top estimates; raises outlook

CHICAGO (Reuters) - Medtronic Inc (MDT.N) posted better-than-expected quarterly results, outperforming rivals Boston Scientific Corp (BSX.N) and St Jude Medical (STJ.N) in the lucrative market for devices that protect against irregular heart rhythms.

The world's largest standalone medical device maker, whose shares rose 5.9 percent to 13-month highs, also raised its fiscal-year profit forecast, crediting cost cuts and shifting of resources to weather the turbulent economic environment.

"They beat on the top line with strong, broad-based revenue growth and they are executing on the bottom line as well in terms of controlling expenses," said Edward Jones analyst Aaron Vaughn.

The company's showing in implantable cardioverter defibrillators (ICDs) stood in sharp contrast to Boston Scientific and St Jude, which issued profit warnings last month, suggesting that Medtronic is back on the offensive after ceding market share in recent years following a major product recall.

"This is really the fourth quarter in a row that we've been able to stabilize our market share position in the ICD arena," Medtronic Chief Executive Bill Hawkins said in an interview.

Net income for Medtronic's fiscal second quarter, ended October 30, was $868 million, or 78 cents a share, compared with $547 million, or 48 cents a share, a year earlier.

Excluding special items, the Minneapolis-based medical device maker said it earned 77 cents a share. Analysts on average expected 74 cents, according to Thomson Reuters

I/B/E/S.

Second-quarter revenue rose 8 percent to $3.84 billion, compared with analysts' average forecast of $3.75 billion.

Revenue from ICDs -- the company's biggest product -- rose to $754 million in the second quarter from $724 million a year earlier. Medtronic is the top ICD maker with about half of the market for the devices.

"I've long believed that Medtronic had arrested their share losses and would perform well this quarter relative to the competition, and they did that," said Tim Nelson, a healthcare analyst with First American Funds.

Revenue in the company's Cardiac Rhythm Disease Management division, which includes both ICDs and pacemakers, increased 3 percent to $1.28 billion.

Medtronic said it maintained market share in the U.S. ICD market and gained modestly in faster-growing international markets. The market worldwide grew in the mid-single digits.

"In the U.S. we did not experience a slowdown in customer buying patterns," said Medtronic Chief Executive Bill Hawkins.

ICD prices declined at a low-single-digit rate, but pacemakers saw slightly more price pressure, the company said.

Revenue from cardiovascular products, including stents to treat clogged arteries, jumped 17 percent to $696 million.

In spinal products, revenue grew 4 percent to $862 million. Revenue from neurological devices that treat pain and other conditions rose 12 percent to $384 million, and diabetes product revenue was up 10 percent to $300 million.

Medtronic raised its fiscal 2010 earnings forecast to a range of $3.17 to $3.22 per share from its previous outlook of $3.10 to $3.20. It maintained its revenue forecast of 5 percent to 8 percent growth.

"They had really good (cost) controls on the bottom line, which I think is what lead them to be able to raise guidance by a pretty good amount," Gabelli & Co analyst Jeff Jonas said.

Medtronic also said it does not expect a recent warning letter from U.S. regulators over quality system procedures at its Mounds View, Minnesota, pacemaker manufacturing facility to hurt its ability to introduce new products. An MRI-safe pacemaker is a key product in the company's pipeline.

Shares of Medtronic rose $2.38 to $42.69 in morning trading on the New York Stock Exchange.

(Reporting by Susan Kelly and Lewis Krauskopf; Editing by John Wallace and Derek Caney)