(Reuters) - Medtronic Plc reported quarterly profit ahead of estimates on strong demand for its surgical instruments and forecast better-than-expected 2020 earnings on Thursday, sending shares of the medical device maker up nearly 3%.
The company has been building its minimally invasive and robotic surgery device businesses through new launches and acquisitions to ease the impact of rising competition it faces at its top-earning cardiac and vascular unit.
There had been growing concerns among investors after the U.S. regulators raised safety concerns about Medtronic’s drug-coated balloons, which is part of the company’s biggest selling unit, as well as a recent closure of a plant that Medtronic uses to sterilize its surgical instruments.
“(The results) should reset expectations and turn the conversation back to the product pipeline, quarterly cadence, and cash flow deployment,” BMO Capital Markets analyst Joanne Wuensch wrote in a note.
The minimally invasive therapies business, which makes surgical instruments used to treat hernia and kidney ailments, brought in revenue of $2.26 billion in the fourth quarter, above estimates of $2.23 billion, according to IBES data from Refinitiv.
Medtronic’s restorative therapies unit, bolstered by its buyout of robotic surgery systems maker Mazor Robotics, generated $2.22 billion in revenue, ahead of the consensus estimate of $2.17 billion.
“The launch of the Mazor X is off to a great start and we expect this will continue to drive growth in our newest surgery business,” Chief Executive Omar Ishrak said on a post-earnings conference call.
“The quarter is very good, there was a lot of nervousness around growth,” Evercore ISI analyst Vijay Kumar said, adding that the conference call provided more confidence than the numbers.
However, sales at Medtronic’s biggest unit, which makes defibrillators, balloons, heart valves and stents, came in at $3.05 billion, slightly below expectations.
Medtronic said it expects full-year adjusted earnings between $5.44 and $5.50 per share, above analysts’ expectation of $5.44.
Still, the company warned that revenue growth in the first quarter would be lower than normal due to the expected impact from the closure of the sterilization plant owned by privately held Sterigenics and the FDA’s concerns over the use of paclitaxel-coated balloons.
Excluding items, Medtronic earned $1.54 per share, beating analysts’ expectations of $1.46.
Net sales rose marginally to $8.15 billion, above estimates of $8.11 billion.
Shares of the Dublin-based company rose 2.8% to $91.23 in early trading.
Reporting by Aakash Jagadeesh Babu and Saumya Sibi Joseph in Bengaluru; Editing by Shinjini Ganguli