Medtronic’s quarterly profit rises on new heart device sales

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Medtronic Inc., the world’s biggest maker of heart-rhythm devices, reported profit that beat analysts’ estimates for the final full quarter before the company acquired Covidien Plc and moved its tax address to Ireland.

Excluding one-time items, earnings were $1.01 a share in the fiscal third quarter, which ended Jan. 23. That topped the 97-cent average of 16 analyst estimates compiled by Bloomberg. Revenue rose 3.7 percent to $4.32 billion.

Medtronic purchased Covidien for $49.9 billion in January, moving its legal address to Dublin and keeping operational headquarters in Fridley. The deal gives the combined company about $7 billion in annual free cash flow, with about 60 percent coming from outside the U.S. and beyond the reach of the Internal Revenue Service, said Chief Financial Officer Gary Ellis.

Net income increased to $977 million, or 98 cents a share, from $762 million, or 75 cents, a year earlier, the company said in a statement. Medtronic forecast cash earnings of $1.08 to $1.13 a share in the fourth quarter, with foreign exchange rates trimming $420 million to $480 million from revenue of $7 billion to $7.1 billion.

All three of the company’s business units posted sales growth in the fiscal third quarter, with revenue for cardiac and vascular products hitting double-digit increases for the first time in years. The results were buoyed by the introduction of new products, including the tiny implanted Reveal Linq that spots dangerous heart rhythms, the CoreValve device used to repair a damaged aortic valve and the MiniMed pump that shuts off when insulin gets to dangerous levels.

‘Coming together’

“We have a slew of new products and markets that are going our way,” Chief Executive Officer Omar Ishrak said in a telephone interview. “We’ve taken share and things are coming together. We will get a quarter where the market will hit us — those things happen. But sometimes you will have a quarter where everything goes your way, and this is one.”

One thing that went against the company was the strong U.S. dollar, cutting into sales growth. Leaving out currency fluctuations, revenue would have increased 8 percent from a year earlier, Medtronic said. The strong dollar is expected to continue weighing on results in fiscal 2016, particularly since Covidien didn’t employ a hedging strategy.

Medtronic estimated that the combined company will post revenue growth for fiscal year 2016 in the mid-single digits, leaving out currency changes. Foreign-exchange rates, if they remain similar to current levels, will reduce sales by $1.2 billion to $1.4 billion, or 30 cents to 40 cents a share, for the year, Ellis said.