Medtronic (MDT) Tops Q2 EPS by 1c

November 22, 2016 6:47 AM EST

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Medtronic (NYSE: MDT) reported Q2 EPS of $1.12, $0.01 better than the analyst estimate of $1.11. Revenue for the quarter came in at $7.35 billion versus the consensus estimate of $7.46 billion.

"Q2 revenue was disappointing and did not meet our expectations. We faced issues that affected our growth, including slower than expected revenue as we await new product introductions, particularly in CVG and Diabetes," said Omar Ishrak, Medtronic chairman and chief executive officer. "Despite this revenue shortfall, we produced a strong improvement in operating margins and double digit constant currency earnings per share growth."

GUIDANCE:

Medtronic sees FY2017 EPS of $4.55-$4.60, versus the consensus of $4.66.

The company today updated its fiscal year 2017 revenue and free cash flow outlook and EPS guidance. Consistent with the company's long-term, mid-single digit constant currency revenue growth expectation, the company now expects fiscal year 2017 revenue growth to be within the mid-single digit range on a constant currency, constant weeks basis, as opposed to the upper half of the mid-single digit range signaled previously. The company expects revenue growth for the second half of fiscal year 2017 to also be in the mid-single range on a constant currency basis. While the impact from foreign currency is fluid, if current exchange rates remain similar for the remainder of the fiscal year, the company's full year revenue would be negatively affected by approximately $20 million to $60 million, including an approximate $10 million to $30 million negative impact in the third fiscal quarter.

In addition, the company updated its diluted non-GAAP EPS guidance for fiscal year 2017. The company continues to expect fiscal year 2017 diluted non-GAAP EPS growth to be in the double digits on a constant currency, constant week basis, which is consistent with the company's long-term, double digit constant currency EPS growth expectation. The company expects non-GAAP diluted EPS growth for the second half of fiscal year 2017 to be in the 8 percent to 10 percent range on a constant currency basis. While the impact from foreign currency is fluid, taking into account the estimated 8 to 10 cent impact from the extra week in the first quarter last fiscal year, as well as an estimated negative impact from foreign currency to fiscal year 2017 EPS of 20 to 22 cents, assuming current exchange rates remain similar for the rest of the year, this growth guidance implies fiscal year 2017 non-GAAP diluted EPS in the range of $4.55 to $4.60.

Starting this quarter, the company is modifying its free cash flow outlook methodology to more closely align the company's free cash flow projection with the results it reports each quarter. The company previously provided an adjusted free cash flow outlook, which would exclude cash payments related to non-GAAP items that might occur during the year, and will now provide an actual free cash flow outlook, which includes these items in projected free cash flow. The company expects free cash flow for fiscal year 2017 to be in the range of $5 to $6 billion.

"While some of the challenges that affected revenue in Q2 could persist in the near term, we remain confident in our ability to deliver mid-single digit constant currency revenue growth and double-digit constant currency EPS growth, not only in our current fiscal year, but on a sustained basis into the future," said Ishrak. "As always, we remain committed to applying our medical technology and solutions to help address the universal healthcare needs of improving clinical outcomes, expanding access to care, and optimizing cost and efficiency, which combined represent a perpetual source of opportunity in healthcare."

For earnings history and earnings-related data on Medtronic (MDT) click here.



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