Medtronic profit up; shares fall on weak demand in Europe
(Reuters) - Medtronic Inc (MDT.N) reported higher quarterly earnings on Tuesday, but sales of key heart and spine devices fell and overall European sales weakened in January, sending the company's shares down nearly 3 percent.
Chief Financial Officer Gary Ellis attributed the decline in Medtronic's stock to management's comments about Europe.
"The stock had been running up recently," he told Reuters. "But in January, we saw a significant kind of change in Europe. (Today) was the first time we communicated that to the investment community."
Ellis could not point to any policy change in Europe to explain the weak markets there.
European markets generate about a quarter of Medtronic's total revenue.
Chief Executive Officer Omar Ishrak characterized the quarter as "challenging." He noted, however, that there were signs of improvement in the company's largest businesses - cardiac rhythm management and spine - partly because of an increase in procedures, and also because Medtronic took share in those markets.
There is still price pressure, especially in the cardiac rhythm management, he said, but he expects that to subside as Medtronic launches new implantable defibrillators and pacemakers this year.
Medtronic, which also makes heart stents, heart valves, and insulin, reiterated its outlook for the fiscal year, calling for diluted earnings per share of $3.66 to $3.70 on revenue growth of 3 percent to 4 percent.
The company said its net earnings increased to $988 million, or 97 cents per diluted share, in the third quarter ended on January 25 from $935 million, or 88 cents per diluted share, a year earlier.
Excluding special items, mainly related to acquisitions, earnings were 93 cents per share. On that basis, analysts on average were expecting 91 cents.
JPMorgan analyst Michael Weinstein said the beat stemmed mainly from the extension of the research and development tax credit, which was not uniformly reflected in Wall Street models. It added 3 cents per share in the quarter.
Revenue rose 4 percent to $4.03 billion.
Sales of implantable heart defibrillators fell to $654 million from $674 million, while sales of pacemaker system declined to $459 million from $467 million. And sales of spinal products fell to $753 million from $784 million.
Growth in emerging markets, where revenue increased 20 percent to $475 million, offset the weakness in Europe.
Shares of Medtronic were off 2.8 percent at $45.78 in morning trading on the New York Stock Exchange.
(Reporting by Debra Sherman; Editing by Lisa Von Ahn)
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