HomeIH InterestsMedtronic Reports Strong Quarter, Talks M&A Plans

Medtronic Reports Strong Quarter, Talks M&A Plans

Medtronic reported F1Q:19 revenue of $7.4 billion this morning, which after adjustments represents 7% organic growth over the prior-year period and beats estimates by $0.2 billion. Adjusted, diluted non-GAAP EPS increased by 9% in constant currency terms to $1.17, beating consensus of $1.11.

In comments on the earnings call, CEO Omar Ishrak said the performance was attributable to Medtronic “growing our markets and driving share gains across multiple businesses and multiple geographies.” He also noted growth in emerging markets, which he attributed to offering “improved economic value to payers and providers.” Performance in individual product segments is as follows, with all growth rates in constant currency:

  • Cardiac and Vascular: $2.8 billion in revenues, +5%.
    • Cardiac Rhythm & Heart Failure: +1%
    • Coronary & Structural Heart: +11%, attributable to strong worldwide sales of transcatheter aortic valves
    • Aortic, Peripheral & Venous: +5%
  • Minimally Invasive Therapies Group: $2.1 billion in revenues, +5%.
    • Surgical Innovations: +6%, attributable to low-double digit growth in Advanced Energy Advanced Stapling grew in the mid-single digits.
    • Respiratory, Gastrointestinal & Renal: +3%
  • Restorative Therapies Group: $1.9 billion in revenues, +7%.
    • Spine: flat as reported, though when combined with enabling technology used in spine surgeries, which is recognized in the Brain Therapies division, revenue increased in the mid-single digits.
    • Brain Therapies: +14%, driven by high-teens growth in Neurovascular and Neurosurgery.
    • Specialty Therapies: +3%
    • Pain Therapies divisions. +16%, attributable to low-twenties growth in Pain Stimulation, as well as low-double digit growth in Targeted Drug Delivery and high-single digit growth in Interventional Pain.
  • Diabetes Group: $572 million in revenues, +26%
    • Advanced Insulin Management: mid-twenties growth, driven by the ongoing U.S. launch of the MiniMed 670G hybrid closed loop insulin pump system with the Guardian sensor 3 continuous glucose monitor (CGM); ex-U.S., the company reported high-teens constant currency growth on the continued strength of the MiniMed 640G system.
    • Emerging Technologies: high-sixties on a constant currency basis, driven by the U.S. launch of the Guardian Connect CGM system with Sugar.IQ personal diabetes assistant.

The results above emphasize strong execution, growing and innovating existing product lines and organic growth, but does the company have plans to resume M&A activity, which has been relatively quiet in 2018? In response to an analyst question during the conference call, Mr. Ishrak commented that with Medtronic’s strong balance sheet, they are well-positioned to make acquisitions; however, he called M&A a supplement to organic growth, which provides the “highest return investment [the company] can make”, and noted that M&A must be supported by “financial and management bandwidth”. He concluded the the company would continue to look for the right transactions in the form of tuck-in acquisitions.