Medtronic Inc. (NYSE:MDT) posted in-line adjusted earnings and a slight revenue miss in the second quarter of its fiscal year 2013, but expects overall sales growth for the year; shares strengthened on the news. Net earnings came in at $646M, or $0.63 per diluted share, falling 26% year-over-year including one-time charges, but non-GAAP earnings of $902M and $0.88 per share were in-line with analyst estimates. Revenue of $4.095B, however, fell just short of the $4.23B average from the Street, due in-part to declines in its Cardiac Rhythm Disease Management (CRDM) and Spine Therapies business groups. Overall, revenue grew by 2% from the previous quarter, including the effects of currency exchange. That also represents 2% growth, and 5% on a constant currency basis, over the same quarter last year.
Medtronic’s strongest growth came in the emerging markets, where the company reported 18% growth year-over-year on a constant currency basis, while international sales climbed 8%. The company reiterated previous guidance for diluted earnings in fiscal 2013 of between $3.62 and $3.70 per share, 5-7% growth. Medtronic also expects revenue growth of 3-4% on a constant currency basis for the year, $16.67B to $16.83B. The company reported double digit growth in most of its business segments, despite declines in Spinal and CRDM. Medtronic has been on a turnaround in the last year, and is seems to be executing growth well considering macro pressure, outperforming many of its peers YTD such as St. Jude Medical (NYSE:STJ) and Boston Scientific (NYSE:BSX). Investors are, however, nervous about new taxes on medical device makers, set to begin in January of 2013 as part of the Affordable Care Act; the provision imposes a 2.3% excise tax on the medical device industry. Regardless, we expect strength from MDT today, which may subsequently pressure previous highs around $44 in the near-term.
