UPDATED: Medtronic's overseas surge propelled a positive Q1
|Medtronic CEO Omar Ishrak|
At Medtronic ($MDT), Omar Ishrak's mission to diversify and focus on emerging markets continued to pay off during the company's 2014 first quarter. That strategy, combined with organic growth, new product launches and gains from acquisitions, led to a 10% hike in net earnings over the same period last year.
"We are actually quite pleased with the way in which our international regions have performed, not just this quarter but systematically over the last couple of years," Ishrak told FierceMedicalDevices.
First-quarter net earnings reached $953 million, a 10% hike over the same period in fiscal 2013. Revenue grew only slightly, however, hitting $4.083 billion, a 3% jump over a year ago. Medtronic noted that the company is outperforming its rivals, but that the results landed at the lower end of its annual revenue outlook.
International sales are now a big part of Medtronic's bottom line, counting for 46% of the Minnesota device giant's overall revenue during the quarter. The $1.9 billion in revenue generated here represents a 6% hike over the same period in fiscal 2013. Emerging market revenue jumped to $504 million, a 15% increase over the same period last year--reflecting the success of Ishrak's strategy of finding markets and sectors for growth outside of the U.S.
Ishrak said that international sales in Europe, Japan, Australia, New Zealand and all emerging markets have collectively grown in excess of the upper-single-digit range for the last 12 quarters, something he said has left executives "pleased with the level of consistency." But 15% growth for emering markets this quarter, while impressive, is not enough, Ishrak told us.
Ishrak said he expects Medtronic can boost that number by continuing to focus on incremental growth, "and working to make sure therapies we have are adopted by people who can afford them" in emerging markets.
"We're striving to get to 20% and beyond over the long term," he said. "We still have got a lot of work to do, to raise the game a little higher."
Of course, not everything grew like gangbusters. Medtronic's diabetes group, for example, nudged revenue 1% higher during the quarter, generating $369 million. Sales did better internationally, driven in part by a new product launch, but were hampered overall by slow insulin pump revenue due to the delayed launch of the company's MiniMed 530G insulin pump.
And then there's Medtronic's continued legal and safety problems with its Infuse bone growth product, which helped lead to an 11% drop in bone morphogenetic protein revenue. But the spinal division ended up growing 1% overall, countered largely by a 13% jump in surgical technologies revenue and a 3% climb in neuromodulation revenue.
Medtronic's cardiac and vascular group generated 2% more revenue during the quarter, propelled in part by global sales gains for the company's Resolute Integrity drug-eluting stent. Pacing revenue grew to $474 million, but defibrillator revenue declined slightly to $655 million. Medtronic's CoreValve heart valve implant also helped generate better overall numbers for the division at large, the company said, in the face of customer anticipation of the patent struggles it has faced against rival Edwards ($EW) in Germany.
Medtronic said it continues to expect fiscal 2014 revenue to grow 3% to 4% on a constant currency basis, with diluted earnings per share between $3.80 and $3.85.
- read the release
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Editor's note: This story has been updated with quotes from an interview with CEO Omar Ishrak.