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Medtronic's stock price drops over 6% after CFO projects FY'20 headwinds


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Medtronic's stock price drops over 6% after CFO projects FY'20 headwinds

Medtronic PLC CFO and Executive Vice President Karen Parkhill told investors at the 2019 J.P. Morgan Healthcare Conference that the medical device company expects to see pressure on its fiscal year 2020 growth target.

In a Q&A session following the company's Jan. 7 presentation at the conference, Parkhill said that due to recently proposed tax regulations and other projected headwinds, the fiscal year 2020 is expected to be a "below trend" year for Medtronic in regards to the company's 8% long-term compound annual growth rate.

The company's stock price fell 6.49% to $82.45 by the close of U.S. markets on Jan. 7, according to data from S&P Global Market Intelligence.

Despite Parkhill's statement regarding the possible 2020 headwind, Chairman and CEO Omar Ishrak was adamant that the long-term growth of the company is still on track, and said that Medtronic would still achieve its guidance.

The proposed regulations are expected to produce a one-time step up in Medtronic's tax rate, but the company still expects to meet the overall 8% long-range compound annual growth rate, according to a statement from Medtronic.

Parkhill stressed that the regulations are not finalized and the company is "working hard to find offsets."

The CFO also said the company's diabetes group would not see double-digit growth in the back half of the fiscal year 2019. The diabetes group has been one of Medtronic's most successful, bringing in $583 million in revenue in the second quarter of 2019.

The recent stumble comes after the Dublin-based company reported a second straight quarter of positive earnings for the fiscal year 2019. On a Nov. 20 earnings call, Medtronic reported 7.5% revenue growth in the second quarter, its fourth straight quarter of 6.5% or better organic revenue growth.

During the Jan. 7 presentation, Ishrak was confident about the long-term future of the medical device company, touting the company's globalization efforts and continually pointing to the potential of the company's pipeline. Ishrak even reaffirmed his belief that the current pipeline is the strongest that Medtronic has ever had.

Medtronic's robotic surgery system, which is scheduled to launch in fiscal year 2020, was one of the upcoming products Ishrak highlighted.

"[The surgical robotics platform] is completely on track and the more we look at it internally, the more excited we get," Ishrak said. "We think this robot can be a real game-changer in moving open surgery to minimally-invasive and robotic-assisted surgery."

Ishrak added that the cost per procedure with the robotic surgery system will be comparable to current cost per procedure for minimally-invasive surgeries. Along with the robotic surgery product, Ishrak was also excited about the future of next-generation diabetes products.

The annual J.P. Morgan Healthcare Conference in San Francisco brings together more than 9,000 investors, analysts and executives from more than 450 public and private companies.