Medtronic Cuts Guidance on Sluggish Revenue -- 2nd Update

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 [e-mail]

(END) Dow Jones Newswires

November 22, 2016 12:45 ET (17:45 GMT)

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