Medtronic Cuts Guidance on Sluggish Revenue -- 2nd Update
November 22 2016 - 1:00PM
Dow Jones News
By Austen Hufford
Medtronic PLC on Tuesday said revenue growth lagged behind
expectations in the latest quarter while customers waited for new
product releases, and the company signaled some of that
sluggishness could linger.
Shares fell 9% to $72.75 in midday trading as the company also
cut its guidance for the quarter.
"Revenue was disappointing and did not meet our expectations,"
Chief Executive Omar Ishrak said. Slower-than-expected revenue
growth was hurt by upcoming new product introductions in its
cardiovascular and diabetes units, which reduces the demand for
current products as consumers wait for new ones.
In September, the Food and Drug Administration approved for sale
a long-awaited insulin pump made by Medtronic in a significant
advance toward a so-called artificial pancreas for Type 1 diabetes
patients, as it takes some of the guesswork out of blood-sugar
control.
Consumers are waiting for that product, called the MiniMed 670G,
to hit the market, and are declining meanwhile to upgrade their
insulin pumps, Mr. Ishrak said. That is partly because patients
need to be trained how to use each new pump they receive, and
patients don't want to go through training twice, he said.
Sales in the quarter were also hurt by a slowdown in procedures
to replace implantable cardiovascular devices, such as pacemakers
and defibrillators. The slowdown, occurring primarily in the U.S.
market, is partly the result of longer battery life on the devices,
Mr. Ishrak said. "We expect the implantables market to be
challenged for the rest of the year. But we have some new products
that we expect to be catalysts" for sales, he said, including the
new Micra pacemaker, which attaches to the heart without the use of
the wire leads that can sometimes cause complications.
The company said new products should drive revenue growth back
to normal ranges but also warned that "some of the challenges" that
hurt revenue in the quarter could continue in the near term.
Medtronic said it now expects revenue growth in the mid-single
digit range compared with the upper half of the mid-single digit
previously forecast. It also now expects fiscal year 2017 adjusted
earnings per share of between $4.55 to $4.60, down from between
$4.60 to $4.70 previously.
Medtronic reported a fiscal first-quarter profit of $1.12
billion, or 80 cents a share, compared with $520 million, or 36
cents a share, a year ago. Excluding items, the company earned
$1.12 a share. Analysts polled by Thomson Reuters expected earnings
of $1.11 a share.
Revenue grew 4.1% to $7.35 billion.
Jeanne Whalen contributed to this article
Write to Austen Hufford at austen.hufford@wsj.com
(END) Dow Jones Newswires
November 22, 2016 12:45 ET (17:45 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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