Post Earnings Coverage as Medtronic Earnings Surge 13 Percent on Lower Tax Bill

LONDON, UK / ACCESSWIRE / August 30, 2016 / Active Wall St. announces its post-earnings coverage on Medtronic PLC (NYSE: MDT). The company reported its first quarter fiscal 2016 results on August 25, 2016. The world’s largest standalone medical device maker reported better-than-expected quarterly earnings, despite a drop in sales. Register with us now for your free membership at: http://www.activewallst.com/register/.

Today, AWS is promoting its earnings coverage on MDT; touching on stocks like Abbott Laboratories (NYSE: ABT) and St. Jude Medical Inc. (NHYSE: STJ). Get our free coverage by signing up to:

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Earnings Numbers

For the quarter ended on July 29, 2016, Medtronic reported earnings of $929 million, or $0.66 per share, higher by 13% as compared to earnings of $820 million, or $0.57 per share in the prior year’s quarter. Adjustments in the quarter primarily included certain litigation as well as restructuring charges, intangible asset amortization, acquisition-related items and certain tax adjustments. Excluding items, the company earned $1.03 a share compared to $1.02 a year ago. Analysts expected earnings of $1.01 a share. Medtronic’s bottom-line was helped by a lower income-tax provision and effective tax rate in the quarter, while its net interest expense dropped 6.2%.

Revenue declined 1.5% to $7.17 billion, in-line with analysts’ expectation. The company blamed the decline on an extra week included in the prior-year period and the impact of foreign currency fluctuation which took $7 million out of the quarterly revenue. The company noted that revenue improved 5%, excluding the extra week and currency effects.

During Q1 FY17, total costs of products sold declined approximately 8%, while provision for income taxes more than halved to $59 million from $120 million in the year ago period.

“Q1 was another strong quarter for Medtronic, where our diversified businesses and geographies delivered solid results,” said Omar Ishrak, Medtronic’s chairman and chief executive officer.

Segment Results

During Q1 FY17, revenue from Medtronic’s cardiac and vascular unit, which sells defibrillators, pace-makers, heart valves and stents, dropped 2.1% to $2.52 billion; however revenue increased by mid-single digits on an adjusted basis. The division accounted for about 35% of total sales in the reported quarter. The company’s minimally-invasive therapies group, formerly the Covidien Group, which includes patient monitoring and surgical devices, declined 1% to $2.42 billion or a mid-single digit increase on an adjusted basis.

Medtronic’s restorative therapies unit, which consists of the Spine, Neuromodulation, Surgical Technologies and Neurovascular segments, saw a revenue drop of 2% to $1.77 billion. The diabetes care unit, which comprise of the Diabetes Group, including the Intensive Insulin Management, Non-Intensive Diabetes Therapies and Diabetes Services & Solutions divisions, saw revenue grow by 2% to $452 million.

Heartware Acquisition

Medical equipment manufacturers are operating in a hyper competitive market, facing tough negotiation from hospitals that have grown in size and driving a hard bargain on the price. In order to counter the margin pressures and increase their negotiating leverage and pricing power, these manufacturers are trying to strengthen their offering through acquisition.

On April 28, 2016, Abbott Laboratories announced a deal to acquire St. Jude Medical Inc. in a $25 billion tie up. On June 27, 2016, Medtronic revealed that it would purchase HeartWare International Inc. for $1.1 billion. The company closed the deal with HeartWare on August 23, 2016, with each outstanding share of HeartWare converted into the right to receive $58 in cash. Medtronic intends to offset any dilutive impact of the deal for two years, until the deal turns profitable in the third year.

Guidance

Medtronic reaffirmed its forecast for FY 2017 adjusted earnings in the range of $4.60 per share to $4.70 per share. For Q2 FY17, the company revenue is projected to grow 5% to 6%, and earnings per share are expected to finish in the lower half of a range of 12% to 16% growth.

Stock Performance

Medtronic’s shares finished the trading session on August 29, 2016, at $87.46, up by 0.99%. A total of 3.71 million of the company’s share were exchanged during the trading session. The company’s stock price has gained 9.21% in the past 3 months and 14.85% since the beginning of the year. The stock is trading at a PE ratio of 35.21.

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