(Reuters) - Medical device maker Medtronic Plc (MDT.N), which last month completed the $49.9 billion purchase of Ireland-based Covidien Plc, reported a better-than-expected third-quarter profit, driven by solid growth in its cardiac and vascular business.
Its shares climbed 3.4 percent to $77.82 in midday trading.
The medical device industry has struggled with sluggish growth in recent years as a soft economy discouraged people from seeking healthcare and hospitals pressed suppliers for lower pricing.
Medtronic said on Tuesday its heart devices including implantable defibrillators, artificial valves and devices to treat atrial fibrillation, an irregular rhythm, contributed to a 5 percent increase in sales in the cardiac and vascular business, its largest unit. Excluding the impact of the strong U.S. dollar, sales in the division were up 10 percent.
“That’s pretty strong growth given the market dynamics we are in,” said Edward Jones analyst Jeff Windau.
Medtronic acquired Covidien to expand the range of products it can offer to hospitals, lower its global tax burden and improve access to its cash outside the United States.
It forecast revenue growth of 4 percent to 6 percent for the combined company in the fourth quarter ending in April. If the dollar remains at its current foreign exchange rate, the impact would be a $420 million to $480 million reduction in reported fourth-quarter revenue, Chief Financial Officer Gary Ellis said on a conference call.
Looking ahead to its 2016 fiscal year, the company is projecting revenue growth in the mid-single-digit range on a constant-currency basis, Ellis said.
Medtronic said it will transition to providing its earnings per share on a cash basis, which excludes amortization, starting in the fourth quarter, when it reports results for the combined company for the first time.
In the third quarter ended Jan. 23, Medtronic said its net profit rose to $977 million, or 98 cents per share, from $762 million, or 75 cents, a year earlier.
Excluding charges primarily for the Covidien acquisition, Medtronic earned $1.01 per share, above the average analyst estimate of 97 cents according to Thomson Reuters I/B/E/S.
Third-quarter revenue increased to $4.32 billion from $4.16 billion. Analysts were expecting $4.25 billion.
U.S. revenue rose 8 percent to $2.46 billion. International revenue fell 2 percent to $1.86 billion, hit by the stronger dollar. Excluding the dollar’s impact, international sales increased 7 percent.
Reporting by Susan Kelly in Chicago and Amrutha Penumudi in Bengaluru; Editing by Ted Kerr and Phil Berlowitz