Medtronic posts 5% income boost despite CRM dip in Q1

Medtronic ($MDT) notched 5% increases in income and revenue last quarter, as its smaller units propped up the company's lagging cardiac rhythm management business.

In the first quarter of fiscal 2013, ended July 27, Medtronic's net earnings swelled 5% to $864 million, and its revenue increased by the same percentage to $4 billion, the company reported. The corporation's CRDM unit--including its line defibrillators and pacemakers--declined 5%, with revenue of $1.2 billion, but nearly across-the-board growth in Medtronic's other businesses more than made up for the drop.

The world's largest devicemaker still cashed in on its other heart devices, as coronary revenue jumped 11% to $433 million, while structural heart sales went up 2% $280 million and endovascular brought in $209 million on 12% growth. On the whole, the company's cardiac and vascular group grew 1%, notching $2.1 billion in revenue.

Spinal devices, Medtronic's second-largest unit, also took a loss on the quarter, falling 5% to $786 million, but that drop was negated by a 3% overall increase in the company's restorative therapies group, reaching $1.9 billion.

Medtronic's per-share earnings guidance remains the same at $3.62 to $3.70 for the year, and CEO Omar Ishrak said in a statement that the company is tracking with its goals. "I am confident that our market-leading portfolio and pipeline, coupled with our focus on globalization and economic value, provide us with significant opportunities for growth," Ishrak said.

The company increased its R&D spending on the quarter by 6% to $385 million, but it slashed tertiary expenses, filed as "other" in its financials, by about 64% down to $39 million. Medtronic is delivering on its promise to cut spending, in part to absorb the effects of a worldwide decline in demand for ICDs, but also to offset the impending 2.3% tax on device sales, which Medtronic said it has been preparing for since before the Affordable Care Act passed.

That commitment to cost-cutting is part of why Medtronic's quarter turned out better than its competitors' in the flagging CRM world. Boston Scientific ($BSX) took a $3.4 billion loss last quarter thanks to a huge goodwill write-down, and St. Jude Medical ($STJ) reported tepid sales growth as its CRM unit declined 6% in its last reported period.

- read Medtronic's release
- check out the full financials (PDF)

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