Medtronic reported unexpectedly strong quarterly profits on Tuesday, though the medical device maker missed its sales targets following declines in sales of implants to treat chronic pain and heart problems.
Meanwhile, in its written earnings announcement Tuesday, the company said the ongoing outbreak of novel coronavirus COVID-19 that began in Wuhan, China, may put a dent in profitability in the ongoing quarter.
But it's still too early to estimate a precise impact, the company said.
Run from offices in Minnesota, Medtronic reported $7.72 billion in sales in the quarter that ended Jan. 24, growing 2.6% organically. Wall Street analysts had projected 3.5% sales growth. But on the profit side, earnings of $1.44 per share grew by 11%, beating analysts' consensus estimate by 6 cents.
Chief Executive Omar Ishrak, in what is scheduled to be his last earnings call as CEO, said the lower-than-expected sales in its fiscal third quarter were caused by transient issues that did not stop the "robust margin expansion" seen in the quarter.
"Organic revenue growth was light this quarter, due largely to transient issues," Ishrak said a news release Tuesday morning. "We continue to feel very good about the fourth quarter, and in the third quarter, a softer top line was more than offset by significant margin expansion, resulting in better-than-expected earnings per share and free cash flow."
Medtronic increased its full-year guidance for adjusted, diluted EPS to a range of $5.63 to $5.65 _ a range that doesn't take into account any negative impact from COVID-19, the company said.
"While COVID-19 is expected to negatively affect the company's fourth quarter financial results, the situation is fluid, and the duration and magnitude of the impact are difficult to quantify at this time. The company continues to monitor and assess business impact daily and will provide an update later in the quarter," the news release said.
Medtronic competitor Boston Scientific told investors earlier this month that the company may lose as much as $40 million in revenue in the ongoing quarter because of canceled medical procedures in China and disruptions to its supply chain there. Computing giant Apple said it will miss revenue targets that it announced just three weeks earlier, because of unforeseen supply problems and lower commercial demand in China.
Until Tuesday, the only thing Medtronic had said about the coronavirus was that the company's nonprofit foundation was getting involved in humanitarian efforts.
The virus is still so new that it only got its official name, COVID-19, last week. But Medtronic joins a growing number of companies with major operations in China that are beginning to report disruptions stemming from the outbreak, which began in Wuhan, capital of the Hubei province in central China in December 2019.
On Feb. 10, the company announced that the Medtronic Foundation had committed $1.2 million to a range of relief efforts, including donating needed products like ventilators, respiratory filters, protective suits, and centrifugal blood pumps to the Wuhan Huoshenshan Hospital, and making cash contributions to the Red Cross, the CDC Foundation, and Project Hope.
