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Medtronic Recovers from 1H18 Disasters with Robust 3Q18 Sales

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Medtronic’s 3Q18 sales performance

In fiscal 3Q18, Medtronic reported $7.4 billion in sales, up ~1% YoY (year-over-year) and ~7% on a constant-currency basis. The company witnessed a strong turnaround after the company’s 1Q18 sales were impacted by hurricanes and wildfires in the United States and the divestiture of the company’s patient care DVT (deep vein thrombosis) and nutritional insufficiency business to Cardinal Health (CAH). Foreign currency was a tailwind in 3Q18, boosting Medtronic’s sales by $177 million.

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Medtronic registered strong growth across all of its business segments in fiscal 3Q18. The company’s CVG (Cardiac and Vascular Group) reported high-single-digit growth, whereas the company’s MITG (Minimally Invasive Therapies Group) and RTG (Restorative Therapies Group) registered mid-single-digit growth. Its Diabetes Group registered growth in the low teens. The company witnessed continued global growth, with mid-single-digit growth in the United States and other developed markets. Medtronic’s emerging market business registered low-double-digit growth in fiscal 3Q18. Peers Abbott Laboratories (ABT), Zimmer Biomet (ZBH), and Thermo Fisher Scientific (TMO) registered sales growth of ~42.3%, ~3.1%, and ~22.1%, respectively, during their recently reported quarters.

Earnings in 3Q18

In 3Q18, Medtronic reported adjusted diluted EPS (earnings per share) of $1.17, registering ~12% growth YoY, excluding the impact of the company’s divestiture to Cardinal Health and ~$0.01 due to foreign exchange. Its adjusted EPS represents leverage of 580 basis points in fiscal 3Q18.

Medtronic reported a $2.2 billion tax charge related to the Tax Cuts and Jobs Act, enacted in December 2017. The charge was primarily due to transition tax on the company’s accumulated overseas earnings, which we’ll discuss further in the next article.

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