Medtronic raises earnings forecast amid supply chain, diabetes business improvements

Q1 trends

Medtronic raised its outlook for the year after reporting revenue growth across all four of its business segments in its fiscal first quarter. CEO Geoff Martha attributed the results to “much improved underlying fundamentals in our markets and supply chain,” amid a broader turnaround that includes changes to the company’s global operations and supply and quality systems.

Better-than-expected pricing and a smaller impact from foreign exchange rates also helped drive improvements to the company’s gross margins, CFO Karen Parkhill said in a Tuesday morning call with investors. 

“At first glance, Medtronic’s 2024 fiscal first quarter has more positives than we would typically expect as the company begins a new fiscal year,” Stifel analyst Rick Wise wrote in a research note, citing better-than-expected sales, margins and growth in key product areas including diabetes and transcatheter aortic valve replacement (TAVR). 

Medtronic raised its revenue and earnings forecasts for its 2024 fiscal year. The company now expects organic revenue growth of 4.5%, in line with the top of the range for its previous forecast, and diluted adjusted earnings per share of $5.08 to $5.16, an increase from the previous range of $5 to $5.10. 

Spinoff update

Medtronic is still in the process of separating its patient monitoring and respiratory interventions businesses, which it had initially planned to spin out into a stand-alone connected care company. In December, Bloomberg reported that the segments were drawing attention from potential buyers including Siemens Healthineers and GE Healthcare. 

Parkhill said Medtronic now expects to complete the separation in the first half of its fiscal year, as the company has been evaluating different types of transactions to maximize shareholder value. 

“We’ve always said a spin sets a high bar, and it remains the likely way we’ll separate these businesses,” she said. 

Diabetes comeback

After the Food and Drug Administration lifted a warning letter on Medtronic’s diabetes business, allowing the company to bring its MiniMed 780G pump and Guardian 4 sensor to the U.S., the company reported an increase in pump sales and new prescribers, Martha told investors.

“We continue to see very strong demand” for the 780G automated insulin delivery system in markets around the world, Martha said. 

Que Dallara, president of Medtronic’s diabetes unit, said the company is seeing growth in the “low 30s” for pump sales in the U.S., including existing customers upgrading to the new pump, and new patients coming in from competitors or from taking insulin injections. 

In total, the segment reported $578 million in sales, a 6.8% increase year-over-year.

Medtronic also expects to close its planned acquisition of patch-pump maker EOFlow by the end of the calendar year, Dallara said. 

Renal denervation decision

An FDA advisory panel will decide this week whether to recommend Medtronic’s Symplicity Spyral renal denervation system for approval. The company published mixed results from a pivotal trial late last year on the device, which is used for a minimally invasive procedure to treat high blood pressure. 

“We’ve been very confident about the prospects of U.S. approval, and we’re exquisitely well prepared for that panel,” Martha said. 

He added that FDA approval would typically come three to four months after a panel recommendation.

“The ramp itself, of course, is going to be dictated by the pace of reimbursement. And we’re well prepared on that front as well,” he said.