Q2 results: Medtronic revenue up 5.3%

Medtronic plc announced financial results for its second quarter of fiscal year 2024 (FY24), which ended October 27, 2023.

Key highlights

• Revenue of $8.0 billion increased 5.3% as reported and 5.0% organic
• GAAP diluted earnings per share (EPS) of $0.68; non-GAAP diluted EPS of $1.25
• Underlying business fundamentals are strong with broad-based, diversified growth coming from multiple businesses and geographies
• Company increases FY24 organic revenue growth and EPS guidance
• Received U.S. FDA approval for Aurora EV-ICD™ system and Symplicity Spyral™ renal denervation (RDN) system; CE Mark for Evolut™ FX TAVR system, Simplera™ standalone CGM, and PulseSelect™ pulsed field ablation (PFA) system

Financial results
Medtronic reported Q2 worldwide revenue of $7.984 billion, an increase of 5.3% as reported and 5.0% on an organic basis. The company’s organic revenue results reflect continued broad strength across businesses and geographies benefiting from durable fundamentals. The organic revenue growth comparison excludes:

• Revenue and the associated impact from foreign currency translation reported as Other, stemming from business separations, including Renal Care Solutions and ongoing manufacturing agreements with Cardinal Health from the divestiture of Patient Care, Deep Vein Thrombosis, and Nutritional Insufficiency; and
• The favorable impact from foreign currency translation of $86 million on the remaining segments.

As reported, Q2 GAAP net income and diluted EPS were $909 million and $0.68, respectively, both representing increases of 113%. As detailed in the financial schedules included at the end of this release, Q2 non-GAAP net income of $1.667 billion decreased 3% and non-GAAP diluted EPS of $1.25 decreased 4%. Included in non-GAAP diluted EPS was an 8 cent, or 6%, unfavorable impact from foreign currency translation.

“We’re delivering a track record of durable, mid-single digit revenue growth. The underlying fundamentals are strong, and our solid results were broad-based across our businesses and geographies,” said Geoff Martha, Medtronic chairman and chief executive officer. “We’re bringing game changing innovation to market, with numerous recent regulatory approvals and major product launches, which give us confidence in our ability to continue delivering dependable growth.”

Cardiovascular portfolio
The Cardiovascular Portfolio includes the Cardiac Rhythm & Heart Failure (CRHF), Structural Heart & Aortic (SHA), and Coronary & Peripheral Vascular (CPV) divisions. Revenue of $2.923 billion increased 5.9% as reported and 4.8% organic, with a high-single digit organic increase in SHA and mid-single digit organic increases in CRHF and CPV.

• CRHF results driven by high-single digit growth in Cardiac Pacing Therapies, including low-double digit growth in Micra™ transcatheter pacing systems; Cardiovascular Diagnostics grew high-single digits and Cardiac Ablation Solutions grew mid-single digits
• SHA drove high-single digit growth in Aortic and Cardiac Surgery; Structural Heart (TAVR) grew mid-single digits on the continued adoption of Evolut™ FX in the U.S. & Japan
• CPV results driven by mid-single digit growth in Coronary on the continued strength of the Onyx Frontier™ drug-eluting stent and low-single digit growth in Peripheral Vascular Health on mid-teens growth in drug-coated balloons
• Received U.S. FDA approval for Aurora EV-ICD™ system and Symplicity Spyral™ RDN system; CE Mark for Evolut™ FX transcatheter aortic valve implantation system and PulseSelect™ pulsed field ablation (PFA) system
• Presented four-year results from Evolut Low Risk Trial at the 2023 TCT conference showing the Evolut™ TAVR system demonstrated exceptional outcomes with sustained valve performance, proven by significantly better hemodynamics, low thrombosis rates, and lower and diverging rates of all-cause mortality or disabling stroke than surgical aortic valve replacement (SAVR) at four years.

Neuroscience portfolio
The Neuroscience Portfolio includes the Cranial & Spinal Technologies (CST), Specialty Therapies, and Neuromodulation divisions. Revenue of $2.288 billion increased 4.7% as reported and 4.2% organic, with a high-single digit organic increase in CST and low-single digit organic increases in Specialty Therapies and Neuromodulation.

• CST delivered high-single digit Core Spine growth on implant pull-through fueled by continued adoption of the AiBLE™ ecosystem; Neurosurgery grew mid-single digits on strong sales of StealthStation™ navigation and O-arm™ imaging systems
• Specialty Therapies results driven by mid-single digit growth in Neurovascular on strength in flow diversion and low-single digit growth in ENT and Pelvic Health; excluding a product line divestiture, Pelvic Health grew mid-single digits
• Neuromodulation drove mid-single digit growth in Targeted Drug Delivery and low-single digit growth in Pain Stim

Medical surgical portfolio
The Medical Surgical Portfolio includes the Surgical & Endoscopy (SE) and the Patient Monitoring & Respiratory Interventions (PMRI) divisions. Revenue of $2.142 billion increased 7.0% as reported and 5.6% organic, with a high-single digit organic increase in SE and low-single digit organic increase in PMRI.

• SE results driven by low-double digit growth in General Surgical Technologies, mid-single digit growth in Advanced Surgical Technologies, and low-double digit growth in Endoscopy
• SE also drove installed base growth of the Hugo™ robotic-assisted surgery (RAS) system; received Investigational Device Exemption (IDE) from U.S. FDA to begin the U.S. clinical trial for Hugo™ RAS system for Hernia procedures
• PMRI results driven by low-single digit growth in Patient Monitoring, with double-digit growth in Nellcor™ pulse oximetry monitor sales; Respiratory Interventions results were flat, with high-single digit growth in Airways offset by decreases in Ventilator sales

Diabetes
Diabetes revenue of $610 million increased 9.7% as reported and 6.7% organic.

• Non-U.S. Developed Markets grew mid-teens on continued MiniMed™ 780G system adoption and increased CGM attachment rates on the strength of the Guardian™ 4 sensor
• First full quarter of the U.S. launch of MiniMed™ 780G system resulted in low-thirties sequential growth in U.S. Diabetes pump revenue; overall, U.S. Diabetes declined mid-single digits year-over-year on customer attrition versus the prior year; customer base increased sequentially
• Received CE Mark and began phased launch for Simplera™ standalone CGM

Guidance
The company today raised its FY24 revenue growth and EPS guidance.

The company increased its FY24 organic revenue growth guidance to 4.75% versus the prior 4.5%. The organic revenue growth guidance excludes the impact of foreign currency and revenue related to certain businesses reported as Other. Including Other revenue and the impact of foreign currency, if foreign currency exchange rates as of the beginning of November hold, FY24 revenue growth on a reported basis would be approximately 2.6%.

The company increased its FY24 diluted non-GAAP EPS guidance from the prior range of $5.08 to $5.16 to the new range of $5.13 to $5.19, a 4 cent increase at the midpoint. Given the change in foreign currency exchange rates over the past quarter, the foreign exchange impact on FY24 diluted non-GAAP EPS is now estimated to be 2 cents more unfavorable in the second half and is estimated to be a 6% unfavorable impact for the full year.

“Overall, it was another good quarter as we delivered revenue, margins, and earnings ahead of expectations. Combining our second quarter outperformance with our updated tax and foreign currency estimates, we’re raising our full year organic revenue growth and EPS guidance,” said Karen Parkhill, Medtronic EVP & chief financial officer. “Based on the changes we’ve made to our operating model, incentives, and capital allocation, among other drivers, we’ve positioned the company to deliver consistent mid-single digit growth on the top line. As we move ahead, translating this durable revenue growth into durable earnings power remains a top priority.”
MB Bureau