) reported fourth-quarter fiscal 2013 earnings per share (EPS) of
95 cents, up 1% year over year. After taking into account certain
one-time items, adjusted EPS was $1.10, up 11% year over year and
ahead of the Zacks Consensus Estimate of $1.03. Fiscal 2013 EPS
came in at $3.37, a decline of 1% over the prior-year result.
However, the full-year adjusted EPS was up 8% to $3.75, well
ahead of the Zacks Consensus Estimate of $3.69.
Revenues in the reported quarter were $4.459 billion, up 4% year
over year (up 5% at constant exchange rates or CER). It was also
above the Zacks Consensus Estimate of $4.388 billion. The
annualized revenues were pegged at $16.590 billion, up 4% on a
reported basis and 5% at CER, marginally beating the Zacks
Consensus Estimate of $16.521 billion.
Medtronic derived 47% of its total sales from the international
market, which climbed 4% year over year (up 7% at CER) to reach
$2.087 billion in the reported quarter. As a result of the
company's focus on emerging markets, revenues from these regions
experienced continued growth momentum and increased 13% (14% at
CER) to $521 million. This region now represents 12% of the
company's total revenue.
Medtronic earns revenues from two major groups - the Cardiac
& Vascular Group and the Restorative Therapies Group. The
former encompasses the Cardiac Rhythm Disease Management
("CRDM"), Coronary, Structural Heart, and Endovascular
businesses; while the latter includes the Spine, Neuromodulation,
Diabetes and Surgical Technologies businesses.
After a series of lackluster quarterly results, CRDM showed signs
of improvement with 3% year-over-year sales growth (up 4% at CER)
to $1.332 billion. Revenues from Implantable Cardioverter
Defibrillators (ICD) increased 2% at CER to $755 million, which
according to the company outperformed the market. With the
growing strength of the Advisa DR MRI (TM) SureScan (TM) pacing
system in Japan, pacing system revenues increased 5% at CER to
Coronary, Structural Heart and Endovascular recorded growth of
5%, 8% and 10%, respectively, at CER. The company is benefiting
from the sale of the Resolute drug eluting stent ("DES"), which
grew 22% at CER driven by significant share gains of the Resolute
Integrity drug-eluting stent worldwide.
While strong CoreValve transcatheter aortic heart valve sales in
the international markets led to growth in the Structural Heart
business, Endovascular growth was based on solid performances of
the Valiant Captivia thoracic stent graft across key geographies.
The Endurant abdominal aortic stent continues to grow strong in
Spine revenues maintained its sluggish trend and fell 1% year
over year (flat at CER) along with a decline in revenues from BMP
(bone morphogenetic protein) and BKP (balloon kyphoplasty
procedure). At CER, revenues from Core Spinal remained flat at
$671 million. However, excluding revenues from BKP, Core Spinal
grew in the low-single digit at CER.
Meanwhile, Surgical Technologies revenues were $407 million (up
10% year over year and up 11% at CER), while revenues at
Neuromodulation were $492 million (up 6%, up 7% at CER) and at
Diabetes were $407 million (up 4%, same at CER).
Gross margin during the reported quarter contracted 107 basis
points (bps) to 74.6%. However, operating margin expanded 124 bps
year over year to 32.6%, with a 1% increase in selling, general
and administrative expenses (to $1.475 billion), a 4.1% rise in
research and development expenses (to $409 million) and 125%
decline in Other expenses (to $12 million).
Medtronic provided its outlook for fiscal 2014. The company
expects full-year EPS in the range of $3.80−$3.85 (annualized
growth of 6%−8%) on revenue growth of 3%−4% at CER. The current
Zacks Consensus Estimate for EPS stands at $3.83 (on revenues of
$16.998 billion) and remains within the guided range.
After several quarters of tepid growth, we are encouraged with
the signs of improvement in Medtronic's core CRDM and pacing
segments. In this regard, we note that the challenging economic
conditions, a competitive environment, pressure on core segments
and larger-than-expected currency headwinds continue to remain
major causes of concern for medical device majors like
St. Jude Medical
). Both these companies barely managed to stay in line with the
Zacks Consensus Estimate for earnings in the first quarter.
Currently, Medtronic retains a Zacks Rank #2 (Buy). Medical
products companies such as
) which carries a Zacks Rank #1 (Strong Buy), are expected to do
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