Medtronic sales disappoint, firm lowers forecast; shares fall
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Omar Ishrak, CEO of Medtronic, speaks during an IBM keynote address at the 2016 CES trade show in Las Vegas, Nevada, January 6, 2016. REUTERS/Steve Marcus
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By Bill Berkrot and Akankshita Mukhopadhyay
(Reuters) - Medtronic Plc (NYSE: MDT) on Tuesday reported quarterly sales below Wall Street's expectations for virtually all its major product lines and cut its full-year earnings forecast, and the medical device maker's shares fell more than 8 percent.
Medtronic now expects adjusted earnings of $4.55 to $4.60 per share for the fiscal year ending April 28, 2017, down from its prior view of $4.60 to $4.70. It sees percentage revenue growth for the second half of fiscal 2017 in the mid-single digit range.
Chief Executive Omar Ishrak acknowledged that the quarterly results were "disappointing," placing the blame on a confluence of what he said were temporary factors. But investors were not in a forgiving mood, taking the company's share price down $6.98, or 8.7 percent, to $73.60 on the New York Stock Exchange.
Ishrak cited weak sales in the Middle East as governments there deal with diminished purchasing power caused by low oil prices, as well as limits imposed by UK regulators on bulk purchases.
Sales of cardiovascular and diabetes products and minimally invasive therapies all missed analysts' expectations.
The cardiac and vascular unit, whose products include defibrillators, pacemakers, heart valves and stents, posted sales of $2.58 billion for the quarter, below expectations of $2.64 billion.
"Top line growth slowed fairly dramatically," said Jefferies analyst Raj Denhoy, noting that the company was coming off more than two years of strong demand for newer products.
"We're seeing those really strong product cycles start to wane and it's going to be a couple of quarters again before some of the new things will start to contribute," Denhoy said.
Among the most important future growth drivers is Medtronic's MiniMed 670G "artificial pancreas" in which a glucose sensor communicates with an insulin pump to automatically regulate insulin flow. The device received an earlier-than-expected U.S. approval and the company plans to begin selling it in the spring.
Ishrak, on a conference call with analysts, said the launch of 15 surgical products and the MiniMed 670G "will give us enough growth to take us well within the mid single-digit range" for fiscal 2017 revenue.
Improvement in the back half of the year is essential, Cowen & Co analysts said, adding that they remained optimistic the company would rebound.
Total revenue rose 4 percent to $7.35 billion, missing the average analyst estimate of $7.46 billion, according to Thomson Reuters I/B/E/S.
Excluding items, the company earned $1.12 per share, topping analysts' estimates by one cent.
(Additional reporting by Natalie Grover in Bengaluru; Editing by Martina D'Couto and Steve Orlofsky)
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