The world's largest medical device company, Medtronic (MDT -2.17%), reported its third-quarter earnings results before the opening bell today. The report pointed to modest top-line expansion, as well as a number of higher expenses that actually caused its profit to dip.
Medtronic's quarterly revenue inched higher by 3.4% to $4.163 billion, from $4.027 billion in the year-ago period. International and emerging market sales provided the bulk of the spark, with international sales up 4% and emerging market revenue rising 12%, both on a constant currency basis.
Net income, however, fell 3% on an adjusted basis to $916 million as EPS dipped 2% to $0.91. Medtronic blamed the drop in EPS on three factors: nonrenewal of the U.S. research and development tax credit, higher Obamacare expenses as they relate to the medical device excise tax, and a large expense writedown related to its renal denervation in-process R&D following its HTN-3 trial not meeting its primary endpoint.
Of Medtronic's three operating segments, its diabetes group saw the most robust gains. Revenue rose 16% to $436 million due to the introduction of new products, including its artificial pancreas system, the MiniMed 530G. Unfortunately, this is by far Medtronic's smallest operating segment.
Growth in its more mature cardiac and vascular operation, as well as restorative therapies group, was more subdued.
Cardiac rhythm disease management revenue inched higher by 2% on a constant currency basis and accounted for close to 30% of total quarterly revenue at $1.184 billion. On the flip side in its cardiac and vascular segment, coronary revenue was flat excluding currency effects.
Restorative therapies delivered 5% sales growth excluding currency effects, with surgical technologies and neuromodulation revenue up 11% and 7%, respectively, while spine revenue remained flat at $744 million.
Looking ahead, Medtronic reaffirmed its prior guidance of 3%-4% revenue growth on a constant currency basis for the fourth quarter and full fiscal year, but tightened its full-year EPS range to $3.81-$3.83, from a range of $3.80-$3.85 issued in the prior quarter, implying adjusted EPS growth of 6% year over year.