Aug 19, 2008 5:53 pm US/Central
Medtronic 1Q Profit Jumps
MINNEAPOLIS (AP) ―
Medtronic Inc.'s first-quarter earnings beat Wall Street estimates Tuesday on a combination of lower expenses and higher sales of devices to treat clogged arteries, fractured spines and other ailments.
The world's largest medical device maker posted a profit of $747 million, or 66 cents per share, up 11 percent from $675 million, or 59 cents per share, in the same quarter last year.
Double-digit growth of Medtronic's stent, spinal and electrical-stimulation devices helped offset lackluster growth in the company's largest business unit, heart-shocking defibrillator implants.
Chief Executive Bill Hawkins told analysts that because of Medtronic's diverse products, some of its businesses are bound to underperform while others grow.
"On the whole, the broad med-tech market continues to show solid growth, particularly when compared to other segments of the economy," Hawkins said.
The company spent $66 million in the quarter on employee buyouts and other expenses. In May, Medtronic announced a restructuring plan that will shrink its work force by 3 percent.
Excluding those expenses, the Minneapolis-based company said it earned $813 million, or 72 cents per share for the quarter ended July 25. Sales rose 19 percent to $3.71 billion from $3.13 billion in the year-ago quarter.
Analysts expected a profit of 69 cents per share on $3.67 billion in sales, according to Thomson Reuters. Such estimates typically exclude one-time items.
The company also benefited from reduced research and development expenses compared with last year's first quarter, when it spent $25 million to license patents from Neuropace, a maker of electrical implants to treat epilepsy.
Goldman Sachs analyst Lawrence Keusch said lower research and development costs added 2 cents per share to company earnings.
Revenue from the company's cardiovascular business grew 30 percent, driven by $175 million from the company's Endeavor drug-coated stent, which launched in February. Significantly, Endeavor was able to maintain nearly 20 percent of the U.S. market from the prior quarter, despite the July launch of stents from Abbott Laboratories and Boston Scientific.
Stents are mesh-wire tubes used to prop open arteries after they have been cleared of fatty plaque. Their drug coatings are used to prevent scar tissue from growing through the mesh and blocking blood flow.
Until this year, the roughly $2 billion U.S. market for the devices was limited to stents from Johnson & Johnson and Boston Scientific Corp.
Medtronic's spinal business grew 33 percent, helped by spine repair products acquired from former competitor Kyphon, which Medtronic bought last November.
Sales of the company's largest business, implantable defibrillators, grew about 5 percent to $764 million. The pacemaker-like devices use electrical shocks to stop dangerous heart rhythms that can cause cardiac arrest.
During a conference call, analysts pressed management on whether U.S. demand for the devices will improve anytime soon. Hawkins said the domestic market for the implants should grow in low-single digits, limiting opportunities for expansion.
"We think the market is stable and kind of growing in the range we indicated before," Hawkins said.
Shares of Medtronic rose $1.04, or 2 percent, to $54.48 Tuesday.
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