Monday, May 23, 2011

Medtronic, Inc. (NYSE: MDT): Q4 Earnings Preview 2011

Medtronic Inc. (NYSE: MDT), the world's largest medical device company, is scheduled to release its fiscal fourth-quarter earnings before the opening bell on Tuesday, May 24, 2011. Analysts, on average, expect the company to report earnings of 93 cents per share on revenue of $4.29 billion. In the year ago quarter, the company reported earnings of 90 cents per share on revenue of $4.20 billion.

Medtronic, Inc. manufactures and sells device-based medical therapies worldwide. Medtronic’s product lineup includes spinal devices, defibrillators and pacemakers. . It operates in seven segments: Cardiac Rhythm Disease Management, Spinal, CardioVascular, Neuromodulation, Diabetes, Surgical Technologies and Physio-Control.

In the preceding fiscal third-quarter, the Minneapolis, Minnesota-based company's net income was $924 million, or 86 cents a share, compared with a profit of $831 million, or 75 cents, in the prior-year period. On an adjusted basis, the company earned 86 cents a share in the fourth quarter. Revenue grew 3 percent to $3.96 billion from $3.85 billion. Analysts, on average, expected the company to report earnings of 84 cents per share on revenue of $3.97 billion. 

At its last earnings call in February, the company tightened its earnings per share guidance range to $3.40 to $3.42 from previous forecast of $3.38 to $3.44, excluding the impact from the acquisition of Ardian. Including the estimated $0.02 impact from Ardian dilution in the fourth quarter, the company now expects fiscal year 2011 earnings in the range of $3.38 to $3.40 per share. The forecast excludes any unusual charges or gains.The company noted that it is comfortable with the current fiscal year 2011 consensus estimates of $3.40 per share.

Further, Medtronic said it will restructure its business to align cost structure to current market conditions and intends to reduce its workforce by 4 percent to 5 percent, or 1,500 to 2,000 positions during the fourth quarter. The company also expects to recognize a one-time charge in quarter related to this restructuring.

The company's once spectacular revenue growth has slowed to a crawl on stagnant sales for its core cardiac defibrillator and pacemaker products, mounting skepticism over its back-surgery devices and industrywide price pressures. Despite these issues, the company is looking at strengthening its product portfolio, expansion in emerging markets and cost control to drive growth. One source of new revenue is the growing middle class in India, China and other emerging markets. Chief Executive Officer William A. Hawkins expects sales from emerging markets to soar from 9% today to 20% in 2015. Hawkins expects Medtronic's performance to improve as it launches new products in 2011 that will help ease price pressure. According to Hawkins, emerging technologies will soon start to have a material impact on sales. The company's recent acquisition of Ardian, a company that makes a device to treat high blood pressure, could be "transformative" in the way the disease is treated. 

In February, the company completed the purchase of rights to a chitosan-dextran gel technology from Adelaide Research & Innovation Pty Ltd., the commercial development company of the University of Adelaide, in Australia, Robinson Squidgel Ltd., and Otago Innovation Ltd., a University of Otago company, in New Zealand. Medtronic acquired the technology for potential use in developing future products for functional endoscopic sinus surgery.

During the quarter in review, the company resolved the U.S. FDA warning letters regarding two of its facilities.

Among other developments, Medtronic named General Electric Co. (GE) health-care veteran Omar Ishrak as its new chairman and chief executive, ending a search to find an outsider to replace retiring CEO Bill Hawkins.

Full Disclosure: None.
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