Medtronic beat analysts’ estimates in its third quarter, but continued to lag its 2020 results because of the impact of the coronavirus pandemic. The surge of COVID-19 cases at the end of the year reduced elective procedures.
CEO Geoff Martha said the winter spike in COVID-19 cases halted a rebound in elective surgeries after the initial crush of cases in the spring of 2020 calmed down in summer.
Martha said Medtronic had worked through a backlog of cases before the winter weather led COVID-19 cases to surge again.
On a call with investment analysts, he expressed hope that the worst of the second surge has passed. He predicted that the recovery of the all-important elective surgery market would rebound faster in the U.S. than in Europe.
But in a sign that much of American business remains hostage to the coronavirus, Medtronic offered no formal future financial guidance because of the uncertainty caused by the pandemic, which has now killed more than 500,000 people in the U.S.
The company, based in Dublin, Ireland, but run out of Fridley, reported revenue of $7.8 billion. Net income of $1.8 billion, or $1.29 per share, was down 10% from the same period last year.
U.S. revenue for the world’s largest medical device maker was down 2%. Revenue was flat in the company’s other sectors, according to a news release.
Martha cited “sequential improvements in both revenue and earnings, despite the impact of the COVID resurgence on procedure volumes in late December and January.”
He said hospitals have started to buy more capital equipment from Medtronic, most of it used in procedures. Martha said that the company was on track to “returning to growth.”
Still, the company has seen a lag in average daily sales in February, continuing a trend from January, Chief Financial Officer Karen Parkhill told analysts. Prospects are better for March and April.
Ironically, one of the headwinds Medtronic faces as the COVID-19 threat diminishes is a loss of ventilator sales sparked by the pandemic.
Ventilator sales do not make up a large part of Medtronic’s business, but they were still triple what they were last year in the third quarter, Martha said, even as sales trended down.
Martha pointed to increases in market share in several sectors to demonstrate his confidence in the company’s strategic growth potential.
The company has offered dividend increases for 43 years, Parkhill said. It’s 2% percent return ranks in the top quintile of corporations.
And at least one silver lining has come with the pandemic. Martha said remote use of devices “is really picking up.” This includes remote uses of cardiac devices and remote MRIs.
“When we couldn’t meet with doctors,” said Martha, “I was amazed at how digital [technology] came to the rescue.”
Jim Spencer • 202-662-7432