Medtronic's ($MDT) struggling spinal division is the sole black mark on an otherwise stellar fiscal 2014 second quarter.
Spine revenue dipped 5% for the quarter, to $746 million. But every other division at the Minnesota device giant reported gains. Even sales for pacemakers, defibrillators and stents trended higher, a reverse of years of sluggish numbers and counter to broader industry sales struggles for each product line. Revenue in emerging markets grew by double digits, and net earnings soared.
Overall revenue nearly reached $4.2 billion for the quarter, 2.4% higher than the $4 billion generated in the fiscal 2013 second quarter, a result that exceeded investor expectations. Net earnings reached $902 million, or 89 cents per diluted share, representing a sizable double-digit gain over a year ago.
Medtronic Chairman, President and CEO Omar Ishrak noted in a statement that the company's second-quarter revenue growth was in line with the company's guidance. He added that Medtronic is "performing at or better than the market in almost every one of our business lines." Also, Ishrak said, Medtronic's performance reflects ongoing "consistent, dependable growth."
Medtronic reported solid revenue gains for its cardiac rhythm disease management, structural heart, endovascular, surgical technologies, neuromodulation and diabetes divisions.
But the company's Restorative Therapies Group reflects some of the company's few remaining trouble spots. The division booked a small increase in sales--about 1% higher compared to the fiscal 2013 second quarter. And while there were strong gains for neuromodulation and surgical technologies, spinal revenue brought down the overall numbers for the group, largely a result of legal and safety problems with Medtronic's Infuse bone growth product. Not surprisingly, bone morphogenetic protein revenue reached $110 million for the quarter, a 17% decline on a constant currency basis and a continuation of revenue declines from previous quarters.
Medtronic maintained its guidance for fiscal 2014, projecting a growth of 3% to 4% on a constant currency basis with diluted earnings per share between $3.80 and $3.85.
Ishrak said the company is "on the verge of bringing a number of new therapies to market over the coming quarters," so it will be interesting to see whether those numbers remain static or actually trend higher. But other factors could affect those sales projections negatively. For example, the company is dealing with a recall for a number of potentially faulty guidewires used for various cardiac procedures. The FDA recently slapped a "Class I" label on the effort, its most serious designation.
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