Medtronic sees rev grow, beats street in Q3 on lifted US sales

Medtronic (NYSE:MDT) today reported a solid 3rd quarter for 2016, seeing revenue rise over 60% compared against last year, though shares have dipped in early morning trading.

Fridley, Minn.-based Medtronic reported profits of $1.1 billion, or 77¢ per share, on sales of $6.9 billion for the 3 months ended January 29. That amounts to a 12.1% bottom-line gain on sales growth of 60.6% compared with the same period in 2015.

Adjusted to exclude 1-time items, profits were $1.5 billion, and earnings per share were $1.17, trouncing analysts on Wall Street’s expectations who were looking for an adjusted EPS $1.06.

Sales in the United States rose to $3.97 billion from $2.46 billion a year earlier. U.S. sales contributed about 75% of the company’s total revenue.

Medtronic’s revenue increase doesn’t take into account its acquisition of Covidien, which it closed in 2015. Taking into account the combined revenue for both companies last year, Medtronic only saw a 0.6% increase in revenue, from $6.9 billion to $6.93 billion.

Shares are down 4.3% as of 9:31 a.m. EST, trading at $74.02.

“Our performance in Q3 was solid, with sustained execution resulting in another quarter of market outperformance and revenue growth in the upper half of our mid-single digit expectation. In addition, the Covidien integration is delivering robust operating leverage as we realize our committed cost synergies. All of this is translating into significant free cash flow generation, which we are reinvesting in future growth opportunities while at the same time providing strong returns to our shareholders,” CEO Omar Ishrak said in an SEC filing.

The company provided guidance for Q4 for the year, expecting revenue growth between 5 and 5.5%, which is consistent with its prior outlook. Medtronic said it expects EPS for the full fiscal year 2016 to be between $4.36 and $4.40.

“As we mark the 1 year anniversary of the Covidien acquisition, we have preserved the growth of both companies and are realizing significant cost synergies and incremental revenue opportunities. Our combined company has a much more diversified revenue base, which together with our sustained execution, gives us increased confidence that consistent, mid-single digit revenue growth is achievable. Looking ahead, stakeholders are seeking not only to improve clinical outcomes and expand access to care, but are also looking for solutions to optimize cost and efficiency. We remain convinced that our technologies and services can play a central role to make the shift to value-based healthcare successful,” CEO Ishrak said in prepared remarks.

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