Omar Ishrak, Medtronic's (NYSE: MDT ) newly-appointed CEO, looks like he has his work cut out for him trying to get the medical-device maker growing again.
Medtronic announced its fourth fiscal quarter results and guidance for the fiscal year that started May 1. Neither was particularly encouraging.
Revenue in the fourth fiscal quarter was flat on a constant currency basis. Sales of defibrillators dropped 16% on the same basis, but that was somewhat expected. This time last year, Medtronic and St. Jude Medical (NYSE: STJ ) were benefiting from Boston Scientific's (NYSE: BSX ) recall of its defibrillators. Unfortunately, Medronic wasn't able to hold onto the business once its rival got its act together.
On the bottom line, minus charges for the layoffs and the like, Medtronic was able to raise earnings per share slightly -- but that was only because share buybacks lowered the share count. Adjusted net earnings actually fell 2%.
Adjusted earnings are expected to grow 6% to 9% in the 2012 fiscal year, but that's mostly on the back of cost cutting. Revenue guidance was a paltry 1% to 3%. Keep in mind though, the guidance is likely a little cautious. Better to guide low and allow the new CEO, who starts next month, to raise guidance, than make him miss guidance right out of the gate.
The company pegs its growth to the growth of its overall market. Unfortunately there are only so many hearts and spines -- Medtronic's two largest units -- that need fixing. The company bought Ardian earlier this year for its revolutionary catheter system that treats high blood pressure by deactivating nerves around the kidneys. I like the expansion into new markets; its smaller units -- diabetes treatments, surgical technology, and neuromodulation devices -- all increased sales in the last fiscal year. Unfortunately, the growth in the smaller units is swamped out by the larger units.
Investors looking for a growth company in the devices realm should look at Intuitive Surgical (Nasdaq: ISRG ) or Volcano (Nasdaq: VOLC ) . You're not going to get it from Medtronic, new CEO or not.
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