Medtronic Beats Zacks Ests

Medtronic, Inc. (MDT – Analyst Report) reported fourth quarter fiscal 2010 earnings per share of 89 cents, beating the Zacks Consensus Estimate of 88 cents and the year-ago earnings of 82 cents. In fiscal 2010, earnings per share were $3.22, compared to the Zacks Consensus Estimate of $3.21 and $2.92 in the year-ago period.

Quarterly results

Total revenues in the fourth quarter increased 10% year-over-year to $4.196 billion. Excluding favorable foreign currency translation, total revenues increased 6% year over year. This is the first time the company has earned revenues in excess of $4 billion in a quarter.

Excluding Spinal, Medtronic witnessed sales growth across all business segments. Cardiac Rhythm Disease Management revenues increased 8% year-over-year to $1.41 billion, driven by the strong demand for implantable cardioverter defibrillators (ICDs). Spinal revenues were roughly flat year-over-year at $880 million. Growth was observed in international markets buoyed by higher demand for Medtronic’s balloon kyphoplasty in Western Europe.

CardioVascular revenues increased 18% year-over-year to $757 million. An increase in revenues can be attributed to strong sales growth across the company’s Coronary, Structural Heart Disease and Endovascular segments. Higher international sales across the entire CardioVascular product portfolio also contributed to growth in this segment.

Neuromodulation revenues increased 6% year-over-year to $411 million, primarily due to higher sales of Activa PC, RC Deep Brain Stimulation systems, InterStim Therapy products, and higher sales of bowel control products in international markets.

Diabetes, Surgical Technologies and Physio-Control revenues increased 12%, 16% and 60% year-over-year to $332 million, $273 million and $134 million, respectively.

Medtronic reported a gross margin of 75.9% in the fourth quarter, an increase of 20 basis points (bps) year over year. Research and development expenses (excluding IPR&D charges), as a percentage of sales, declined 60 bps year-over-year to 9.0%. Selling, general and administrative expenses, as a percentage of sales, declined 100 bps year over year to 33.3%.

Fiscal year results

Total revenues in fiscal 2010 increased 8% year-over-year to $15.82 billion. Growth was registered across all the business segments.

Cardiac Rhythm Disease Management revenues increased 5% year-over-year to $5.268 billion. Spinal revenues increased 3% year-over-year to $3.500 billion. Both CardioVascular and Neuromodulation revenues increased 18% and 9% year-over-year to $2.864 billion and $1.560 billion, respectively.

Diabetes, Surgical Technologies and Physio-Control revenues increased 11%, 12% and 24% year-over-year to $1.237 billion, $963 million and $425 million, respectively.

Geographically, U.S. sales contributed 59% to total fiscal 2010 revenues and increased 4.2% year over year. International sales increased roughly 15.0% year over year.

Balance Sheet & Cash Flow

Medtronic ended fiscal 2010 with cash, cash equivalents and short-term investments of $3.78 billion, an increase of 125.2% year over year. Cash flow from operations was $4.13 billion, an increase of 6.5% year over year.


Medtronic has provided the guidance for total revenues and earnings per share for fiscal 2011. For the year, the company expects total revenues to grow between 5 and 8% year-over-year on a constant currency basis. Earnings per share are expected in the range of $3.45 to $3.55.

Medtronic is one of the world’s leading medical technology companies, specializing in implantable and interventional therapy devices and products. The company’s closest rivals are Boston Scientific Corp. (BSX – Analyst Report) and St. Jude Medical, Inc. (STJ – Analyst Report).

Currently, we are ‘Neutral’ on Medtronic.


Josh Sandberg

Josh Sandberg is the President of Ortho Spine Partners and Partner for The De Angelis Group. He also serves as Co-Founder and Editor of OrthoSpineNews.

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