Medtronic’s Sales Miss Estimates on Defibrillator Demand

Medtronic’s Quarterly Profit Rises on Demand for Heart Devices
Sales of stents, used to prop open heart arteries, were bolstered by demand in Japan where the company's Resolute device is still in its first year of introduction. Photographer: Munshi Ahmed/Bloomberg

Medtronic Inc., the world’s biggest maker of heart-rhythm devices, said fiscal first-quarter sales missed analysts’ estimates on weaker-than-expected demand for defibrillators and the InFuse bone-growth product.

Net income in the three months ended July 26 increased 10 percent to $953 million, or 93 cents a share, from $864 million, or 83 cents, a year earlier, the Minneapolis-based company said today in a statement. Revenue of $4.08 billion fell short of the $4.12 billion average of 16 analysts’s estimates compiled by Bloomberg. Profit excluding one-time items matched the 88 cents average estimate of 20 analysts.

Sales of Medtronic’s CoreValve, used to repair a damaged aortic valves, were stopped in Germany after a district court in Mannheim in July found the devices infringed a patent held by Edwards Lifesciences Corp. Chief Executive Officer Omar Ishrak reiterated the company’s earnings forecast of $3.80 to $3.85 a share, excluding certain items, for fiscal year 2014, saying sales of other new products should replace any lost demand for CoreValve in Germany.

“Despite clearly strong execution to-date, with incremental headwinds as we move through the year -- including, but not limited to, competitive outside the U.S. defibrillator and pacemaker launches as well as a CoreValve injunction in Germany -- we continue to think Medtronic’s fiscal year 2014 organic sales growth and EPS guidance may be at risk,” said Danielle Antalffy, an analyst with Leerink Swann Research in New York, in a note to clients today.

Ardian Purchase

The company’s expenses related to the 2011 acquisition of Ardian Inc. fell by $96 million. Medtronic purchased Ardian for the company’s hypertension device that destroys nerves near the kidneys. The milestone payments due to Ardian shareholders will be lower than originally anticipated due to slower-than-expected demand in Europe, where the device is currently sold, and a slower than anticipated approval process in the U.S.

Medtronic fell 2.4 percent to $52.83 at the close in New York. The shares have gained 29 percent this year.


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