Medtronic reported a 3.3% decline in sales for its second quarter and lowered revenue expectations for its full fiscal year.
Medtronic lowers sales outlook for fiscal year after lackluster quarter
Volume of medical procedures not bouncing back as quickly as executives at the medical device manufacturer had hoped.
November 22, 2022 at 2:46PM
"Slower-than-predicted procedure and supply recovery drove revenue below our expectations this quarter," Geoff Martha, CEO of Medtronic, said in a statement.
The company reported earnings per share of $1.30 for the quarter, edging out the Wall Street consensus by 2 cents.
The company's stock closed down 5.3% for the day.
Companies across many industries have consistently cited macroeconomic challenges — supply chain issues, inflation, market volatility, currency exchange rates, an overall mood of uncertainty — as a hindrance to better financial results this year.
"The current operating market remains challenging," Martha told analysts on a morning conference call.
The company lowered its outlook for sales in the second half of its fiscal year. Officials are now expecting organic revenue growth of 3.5 to 4% for the next two quarters. That's down from the 4 to 5% forecast three months ago.
"Given a slower pace of market and supply recovery, we're reducing our revenue expectations for the remainder of the year," said Karen Parkhill, Medtronic's chief financial officer, in a statement.
Medtronic's $7.6 billion in sales for the quarter ended Oct. 28 was slightly lower than Wall Street expectations. Its net income of $435 million was down 67% compared with last year.
Early this month, Medtronic reported clinical results for its Symplicity Spyral device at an American Heart Association conference. The new data showed that the product did not outperform blood pressure medications for treating hypertension.
"A weak [quarter] and lowered expectations for the balance of the year coming after what we view as a disappointing [renal denervation] data read-out at [the conference] continues to place doubt on the Medtronic growth story," J.P. Morgan analyst Robbie Marcus wrote in a research note Tuesday morning.
In October, Medtronic announced plans to spin off its patient monitoring and respiratory intervention businesses. The businesses generated revenue of $2.2 billion in the company's latest fiscal year, about 7% of total sales.
At the time of the announcement, Martha said the move was part of an ongoing review of the company's operations and indicated that additional divestitures were possible.
"We remain focused on the ongoing portfolio management process and evaluating any potential additions and subtractions to our portfolio," Martha said at the time.
The company expects to complete the spinoff in 12 to 18 months. The business units will remain part of Medtronic through its current fiscal year.
Martha also offered an update on a U.S. Food and Drug Administration warning letter issued to its diabetes division last December that raised concern over how it had addressed complaints and handled recalls.
"We've now completed 100% of our warning letter commitments," said Martha, adding that the company is ready for a reinspection by the FDA.
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