Medtronic Q4 earnings jumped just 3%

If not for the continued sluggish performance of Medtronic's ($MDT) spine division and flat ICD and pacer sales, the company's fiscal 2012 fourth-quarter earnings growth ended up being pretty solid, if unspectacular, even as pricing pressures continued in the U.S. and European markets.

After an initial spike, the company's share price was down almost a percentage point in late-morning trading, to $37.26.

Individually, stent sales, diabetes and neuromodulation products were among the biggest sales drivers and produced great numbers. For the fourth quarter, cardiovascular revenue jumped 9%, hitting $958 million, thanks to a huge sales boost from the launch of the Resolute Integrity drug-eluting stent. Neuromodulation revenue jumped 7% to $463 million, thanks to demand for implants designed to treat pain, incontinence, and deep brain stimulation treatments. And diabetes revenue soared to $392 million, a 7% rise compared to last year.

But cardiac rhythm disease management sales remained flat during the quarter, at nearly $1.3 billion, down 2%. The company blamed this, in part, on increased competition in the CRT-D space. ICD revenue for the quarter hovered around $744 million, stagnant from the same period a year ago. And spine revenue was even worse, dropping another 7% to $818 million, and the company's biologics revenue dropped 16% (on a constant currency basis), driven largely by the sales plunge for the bone-growth product Infuse. Medtronic has faced ongoing lawsuits and Congressional investigations over how it marketed the product, though some issues have since been settled. The company's spine division performance has led to rumors that Medtronic will sell it.

And so in total, the revenue picture is solid, if unspectacular. The company said it booked global nearly $4.3 billion in fiscal 2012 fourth-quarter revenue, just 3% higher than the $4.16 billion in revenue over the same period last year. But fourth-quarter net earnings rose substantially, to $991 million, or 94 cents per diluted share, up 28% and 31% respectively, compared to the same period last year. Similarly, fiscal 2012 revenue jumped about 3% to nearly $16.2 billion, and net earnings for the year climbed to $3.billion, or $3.41 per diluted share, up 17% and 19%, respectively.

Company chairman and CEO Omar Ishrak said in a statement that he was pleased with the company's overall performance. But he and other Medtronic executives noted during the company's investor call that pricing pressures continue. The ICD business remained flat, for example, as hospitals continued to cut back on inventory levels, with bulk purchases in the space at their lowest level in about three years. But ICD implant rates, Medtronic noted during the call, remained strong. Ishrak told investors during that call that pricing pressures are creating an ideal environment for introducing lower-tier products into the U.S. and other developed markets, as it has with emerging markets.

"The pressures on cost savings in developed (markets), as they increase, there will be room for different tier service lines," Ishrak said.

- read the release

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