Medtronic posts strong earnings, but guidance dropped due to shaky sales
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The Minneapolis-based company posted 2011 first quarter net earnings of $830 million, an increase of 87 percent over the same period in the prior year, which were affected by a $360 million patent litigation charge.
The first quarter worldwide revenue was $3.77 billion, which compared with $3.93 billion reported in the first quarter of fiscal year 2010, representing a decrease of 4 percent. Medtronic said that the revenue outside the U.S. of $1.54 billion was flat compared with the same period last year. International sales accounted for 41 percent of Medtronic’s worldwide revenue.
“A softer global healthcare market impacted by decreased utilization and increased pricing pressure made for a difficult first quarter,” said Bill Hawkins, Medtronic chairman and CEO. “Solid performance from the cardiovascular, diabetes and surgical technologies businesses was offset by softness in other businesses.”
The company said its cardiac and vascular group, which is comprised of cardiac rhythm disease management (CRDM), cardiovascular and Physio-Control, had worldwide sales in the quarter of $2.03 billion, which represents a decrease of 5 percent. The international sales of the cardiac and vascular group were $1.04 billion, which were flat compared with the prior year.
According to Medtronic, the group revenue performance was driven by strong cardiovascular sales offset by weaker sales in CRDM and Physio-Control.
CRDM revenue of $1.22 billion declined 8 percent. Revenue from implantable cardioverter-defibrillators (ICDs) was $722 million, while pacing revenue was $473 million in the quarter. Lower CRDM sales were due to slower market growth and increased pricing pressures, and were partially offset by continued growth of the atrial fibrillation solutions business and the launch of the Protecta ICD in Europe, Medtronic said.
The cardiovascular revenue of $717 million grew 4 percent over the previous year’s first quarter. Revenue growth was driven by international growth of 11 percent. According to the company, revenue performance was driven by the Invatec acquisition and transcatheter valves led by the CoreValve device.
Physio-Control revenue of $84 million declined 13 percent from the prior year’s first fiscal quarter. The revenue decline was due largely to a supplier constraint that has been rectified subsequent to quarter end and a slowdown in spending by certain international governments, Medtronic said.
Diabetes revenue of $312 million grew 6 percent compared with the fiscal quarter of 2010. The company said that growth in the quarter was driven by strong sales of continuous glucose monitoring products.
Partly as a result of what Hawkins defined as "uncertain times," the company also lowered its guidance for the 2011 fiscal year.