Medtronic Profit Rises, Helped by Lower Expenses

Medtronic PLC on Thursday said quarterly sales fell across most of its segments, though the medical-device maker's profit grew thanks to a drop in expenses, including a lower tax burden.

Medtronic reported a fiscal first-quarter profit of $929 million, or 66 cents a share, compared with $820 million, or 57 cents a share, a year ago. Excluding items, the company earned $1.03 a share, compared with $1.02 a year ago. Analysts polled by Thomson Reuters expected earnings of $1.01 a share.

Revenue fell 1% to $7.17 billion, in line with expectations. The company blamed the decline on an extra week included in the prior-year period. Excluding the extra week and currency effects, revenue rose 5%, the company said.

Medtronic's results come as its competitors have seen revenue bolstered as demand shores up at home and abroad. In July, competitor Boston Scientific Corp. raised its profit outlook for the year after reporting better-than-expected quarterly revenue, helped in part by cardiovascular, and St. Jude Medical Inc. posted double-digit revenue growth as it launched new products. St. Jude recently agreed to a $25 billion tie up with Abbott Laboratories.

Medical-device makers are operating in an increasingly competitive market, with hospital customers that have grown in size and are pushing back on the prices they are willing to pay. But like many firms across the health-care sector, medical-device makers have responded to cost pressures by trying to beef up to increase their negotiating leverage and pricing power.

In late June, Medtronic said it would buy HeartWare International Inc. for $1.1 billion, adding more products that treat heart failure to its portfolio. Medtronic's results have been buoyed in recent quarters from its acquisition of Covidien, which closed in early 2015.

In the latest quarter, Medtronic's minimally-invasive therapies group, formerly the Covidien Group, posted a sales decrease of 1% to $2.42 billion, or a mid-single digit increase on an adjusted basis, helped by "above-market growth" in surgical solutions. Sales for the cardiac and vascular segment fell 2% to $2.52 billion, but they rose in the mid-single digits on an adjusted basis.

The restorative-therapies group's revenue fell 2%, while sales in the diabetes group rose 2%.

Medtronic's bottom line was helped by a lower income-tax provision and effective tax rate in the quarter, while its net interest expense fell 6.2%.

Medtronic shares, inactive premarket, have added 6.9% over the past three months.

Write to Joshua Jamerson at [e-mail]

(END) Dow Jones Newswires

August 25, 2016 08:15 ET (12:15 GMT)

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