Health and Healthcare

Medtronic Earnings Fail to Impress Investors

Chris Lange

Published: March 1, 2016 11:15 am

Last Updated: January 13, 2020 12:31 pm

Medtronic PLC (NYSE: MDT) released its fiscal third-quarter earnings report before the markets opened on Tuesday. The company said it had $1.06 earnings per share (EPS) on revenue of $6.9 billion, versus Thomson Reuters consensus estimates of EPS of $1.06 and $6.99 billion in revenue. The same period from the previous year had $1.13 in EPS on $4.32 billion in revenue.

During this past quarter, revenue grew 61% on a constant currency basis from the same period last year, including an increase of 6% in comparable sales.

In terms of guidance for the fiscal fourth quarter, the company expects revenue growth in the range of 5.0% to 5.5% on a constant currency basis. Also, Medtronic expects a negative impact from foreign currency in the fourth quarter of roughly $180 million to $220 million. The consensus estimates for the quarter call for $1.28 in EPS on $7.48 billion in revenue.

At the end of the most recent quarter, the company generated $1.8 billion in adjusted free cash flow. On the books, the company had $17.3 billion in cash, equivalents and investments, compared to $19.5 billion in the same period from last year.

Omar Ishrak, Medtronic chairman and CEO, commented on earnings:

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.

Ishrak added:

As we mark the one 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.

Shares of Medtronic were down 5% to $73.50 on Tuesday, with a consensus analyst price target of $87.09 and a 52-week trading range of $55.54 to $79.50.