Medtronic's net income dropped more than 40% in its first quarter, but was better than expected, the company said.
Medtronic's income down 44% in first quarter, but still better than expected
Suspended elective surgeries damaged performance, which was still better than expected.
August 25, 2020 at 11:28PM
Medtronic — mainly run out of Fridley — attributed the decrease, plus a 13% revenue drop, to economic problems caused by attempts to both stem and allow for hospital capacity to treat COVID-19.
Elective procedures were restricted in many places, and patients also put off some treatments for fear of catching the coronavirus at a hospital.
But revenue dropped in every sector of the company's business relative to the first quarter of fiscal 2020.
With hospitals loosening restrictions on elective surgeries, volumes of procedures involving medical devices are growing. The pandemic situation is still uncertain enough that Medtronic chose not to offer financial guidance going forward.
"We reported solid improvement from last quarter, and our results reflect a faster than expected recovery from the depths of the pandemic we saw back in April," Medtronic CEO Geoff Martha said in a news release.
Net income was $491 million, or 36 cents a share, down from $877 million, or 64 cents a share, in the same period a year ago. Adjusted income was 62 cents a share, which beat analysts' estimates by 44 cents.
At $6.5 billion, revenue was down from $7.5 million a year ago but roughly $1 billion higher than estimates.
The company's shares closed Tuesday at $102.59, up nearly 2.5%.
COVID-driven economic issues effectively negated an extra week of business in the quarterly cycle because of the business year calendar, officials said on an earnings call.
Martha said in a call with analysts that the pandemic has caused Medtronic to find a "new gear" in business development.
Some things that used to take months to develop now take days or weeks, he said. He said the company aims to improve market share in the widespread sectors in which it operates as the world's largest medical device company.
He pointed to 130 product approvals granted to the company this year as proof.
The company also built market share in the first quarter relying on "tuck-in" acquisitions of up to $1 billion to improve its competitive standing rather than larger mergers.
Martha cited the pending acquisition of Companion Medical, maker of the InPen that lets people with diabetes improve monitoring of multiple daily insulin doses, as an example of an investment that could help Medtronic's standing in the diabetes treatment market, a sector in which the company needs to grow.
The purchase of Companion Medical is representative of a strategy concentrated on products that provide "data and insight."
Companywide, Chief Financial Officer Karen Parkhill said, Medtronic hopes to grow 8% per quarter and return to pre-pandemic growth rates by the end of the fiscal year.
Recovery from the pandemic has been significant in the U.S. and China, Martha said.
Parkhill added that the company has enough access to investment capital to take advantage of buying opportunities given the current balance sheet and a research and development agreement with Blackstone investment group.
Jim Spencer • 202-662-7432
Republicans across the country benefited from favorable tailwinds as President-elect Donald Trump resoundingly defeated Democrat Kamala Harris. But that wasn’t the whole story in Minnesota.
