After a difficult first half of 2017 that saw hurricanes and supply problems, Dublin, Ireland-based medical device company Medtronic PLC reported $8.14 billion in fiscal fourth-quarter revenue. That beat the S&P Capital IQ consensus revenue estimate of $8.0 billion.
For the fiscal year 2018, Medtronic reported $29.95 billion in revenue, a 4.6% increase on an organic basis. EPS climbed 6.8% year over year to $1.42.
The strong finish to the year, driven in part by fourth-quarter gains on a constant currency basis of 21.3% in diabetes care and 15.5% in emerging markets, has raised optimism for the coming year.
With new products, including a sensor that regulates insulin delivery in diabetes patients set to be launched in the U.S. this quarter, CFO Karen Parkhill on a May 24 earnings call said Medtronic expects 4% to 4.5% in organic revenue growth for 2019 — a guidance Cowen analyst Joshua Jennings called "conservative."
Jennings and BMO Capital Markets analyst Joanne Wuensch gave the company an "outperform" rating in May 24 notes.
"We have a rich pipeline of products and they come out regularly and that will be sustained into next year," Chairman and CEO Omar Ishrak said on the earnings call. "So we expect an exciting year full of new products, which will continue to fuel our growth," he added.
The picture is different from the first half of the fiscal year 2018. "The second half of the year was particularly strong, overcoming several first-half challenges, including an [information technology] disruption, multiple hurricanes, fires in Santa Rosa and supply constraints in diabetes," said Ishrak.
Medtronic reported revenues of $7.39 billion in the first quarter and a decline to about $7.05 billion in the second quarter.
But rebounding in the last few months of the year, Medtronic reported growth across several sectors in the fourth quarter. The Cardiac and Vascular Group's $3.14 billion in the fourth quarter was a 5.4% increase on a constant currency basis.
The Restorative Therapies Group, which includes spine and brain and pain therapies, saw $2.13 billion in revenues for the quarter, a 6.1% increase on a constant currency basis, and "the best quarter of organic growth" since the group was established eight years ago, Ishrak said.
Driven in part by the Sept. 18 launch of its implantable neurostimulator, Intellis, Medtronic's pain management business saw $332 million in fourth-quarter revenue, a 9.9% increase on a constant currency basis.
"The turnaround is officially underway with back-to-back quarters of strong growth," Ishrak said.
Double-digit growth in the diabetes business, which saw $645 million in fourth-quarter revenue, was fueled by the U.S. launch of the company's MiniMed 670G hybrid closed-loop system, the latest in advances being made to automate diabetes management.
The new device was considered an upgrade over Medtronic's 2013, 530G system, which was the first to turn off the continuous flow of insulin from pumps for two hours when sensors see glucose levels getting too low. The 670G uses a sensor to adjust insulin delivery every five minutes and makes adjustments if analytics predicts basal glucose levels getting too high or too low.
In addition, the company plans to launch its Guardian Connect system this quarter. The stand-alone glucose monitor, which received FDA approval March 12, sends glucose readings to smartphones and sends an alert 10 minutes to 60 minutes before levels are predicted to become too low or too high so patients can adjust their insulin accordingly.
"We're creating new markets, disrupting existing markets and leading in several of the fastest-growing growth markets in med tech," Ishrak said.
The growth in emerging markets was spread across Latin America, the Middle East and Africa, Eastern Europe and China, where revenues grew by double digits in the fourth quarter.
China, the company's largest emerging market, earned $1.8 billion in revenue for the year and grew by 12.7% in the fourth quarter. "This is a significant increase from the less than $0.5 billion of revenue in the region when I joined Medtronic seven years ago," Ishrak said.
