On May 31, 2016 Medtronic plc (NYSE: MDT) reported financial results for its fourth quarter and fiscal year 2016, which ended April 29, 2016 (Press release, Medtronic, MAY 31, 2016, View Source;p=RssLanding&cat=news&id=2173358 [SID:1234512872]).
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The company reported fourth quarter worldwide revenue of $7.567 billion, compared to the $7.304 billion reported in the fourth quarter of fiscal year 2015, an increase of 4 percent, or 6 percent on a constant currency basis. Foreign currency translation had a negative $179 million impact on fourth quarter revenue. As detailed in the financial schedules included through the link at the end of this release, fourth quarter non-GAAP net income and diluted earnings per share (EPS) were $1.796 billion and $1.27, an increase of 7 percent and 9 percent, respectively. As reported, fourth quarter GAAP net income and diluted EPS were $1.104 billion and $0.78.
Fourth quarter U.S. revenue of $4.217 billion represented 56 percent of company revenue and increased 4 percent. Non-U.S. developed market revenue of $2.393 billion represented 31 percent of company revenue and increased 3 percent, or 6 percent on a constant currency basis. Emerging market revenue of $957 million represented 13 percent of company revenue and increased 4 percent, or 15 percent on a constant currency basis.
Medtronic’s fiscal year 2016 revenue of $28.833 billion increased 42 percent, or 7 percent on a comparable, constant currency basis, which adjusts for the impact of foreign currency translation and includes Covidien plc in the prior year comparison, aligning Covidien’s prior year monthly revenue to Medtronic’s fiscal quarters. 2016 revenue growth rates include the benefit from the extra week in the first quarter. Foreign currency translation had a negative $1.502 billion impact on fiscal year 2016 revenue. As detailed in the link at the end of this release, fiscal year 2016 non-GAAP earnings and diluted EPS were $6.228 billion and $4.37, an increase of 31 percent and 2 percent, respectively. As reported, fiscal year 2016 net earnings were $3.538 billion or $2.48 per diluted share, an increase of 32 percent and 3 percent, respectively.
"Our organization once again successfully delivered strong, balanced revenue growth across our groups and geographic regions – growing above the market and exceeding our revenue growth projections," said Omar Ishrak, Medtronic chairman and chief executive officer. "This quarter caps a transformative year for Medtronic, our first full year after closing the largest ever MedTech acquisition. I am pleased with the execution and focus of our teams around the world who delivered sustained revenue growth and exceeded our Covidien cost synergy commitments."
Cardiac and Vascular Group
The Cardiac and Vascular Group (CVG) includes the Cardiac Rhythm & Heart Failure (CRHF), Coronary & Structural Heart (CSH), and Aortic & Peripheral Vascular (APV) divisions. CVG worldwide fourth quarter revenue of $2.736 billion increased 5 percent, or 8 percent on a constant currency basis. CVG revenue performance was driven by strong, balanced growth across all three divisions.
CRHF fourth quarter revenue of $1.492 billion grew 7 percent, or 9 percent on a constant currency basis, significantly outperforming the market on the strength of the Amplia MRI(TM) and Compia MRI(TM) Quad CRT-D launches and ongoing Evera MRI ICD launch in the U.S., adoption of the Micra TPS pacemaker in Europe, continued global adoption of the Reveal LINQ insertable cardiac monitor, and mid-thirties growth in AF Solutions on a constant currency basis.
CSH fourth quarter revenue of $816 million increased 3 percent, or 7 percent on a constant currency basis, led by high-twenties growth on a constant currency basis in transcatheter valves as a result of strong customer adoption of the CoreValve Evolut R. Coronary grew in the low-single digits on a constant currency basis driven by Resolute Onyx(TM) in Europe and emerging markets.
APV fourth quarter revenue of $428 million increased 5 percent, or 8 percent on a constant currency basis, driven by mid-single digit growth on a constant currency basis in Aortic, led by the continued strength of the Endurant IIs aortic stent graft and solid adoption of the Heli-FX EndoAnchor System, as well as strong above-market growth of the clinically differentiated IN.PACT Admiral drug-coated balloon, which holds the leading market position in the U.S. and globally.
Minimally Invasive Therapies Group
The Minimally Invasive Therapies Group (MITG) includes the Surgical Solutions and the Patient Monitoring & Recovery (PMR) divisions. MITG worldwide fourth quarter revenue of $2.460 billion increased 3 percent, or 6 percent on a constant currency basis. MITG had a strong quarter of above-market growth in Surgical Solutions and low-single digit growth on a constant currency basis in PMR.
Surgical Solutions fourth quarter revenue of $1.358 billion increased 5 percent, or 9 percent on a constant currency basis, driven by double-digit growth on a constant currency basis in Advanced Energy and upper-single digit growth on a constant currency basis in Advanced Stapling. Early Technologies grew double-digits on a constant currency basis, led by strong growth in GI Solutions.
PMR fourth quarter revenue of $1.102 billion increased 1 percent, or 3 percent on a constant currency basis, driven by growth in Renal Care Solutions from the recent acquisition of Bellco, which offset negative revenue impacts resulting from the product hold of the Puritan Bennett(TM) 980 ventilator and recall of the battery pack in the Capnostream(TM) 20 capnography monitor.
Restorative Therapies Group
The Restorative Therapies Group (RTG) includes the Spine, Neuromodulation, Surgical Technologies, and Neurovascular divisions. RTG worldwide fourth quarter revenue of $1.875 billion increased 1 percent, or 3 percent on a constant currency basis. Group results were driven by strong growth in Neurovascular and Surgical Technologies and improved results in Spine, which offset low-single digit declines on a constant currency basis in Neuromodulation.
Spine fourth quarter revenue of $737 million declined 1 percent, or was flat on a constant currency basis. Core Spine and Interventional Spine both delivered improved growth. BMP declined in the low-single digits on a constant currency basis, as mid-single digit growth in the U.S. only partially offset the continued loss of BMP sales in Europe as a result of a product hold.
Neuromodulation fourth quarter revenue of $494 million declined 5 percent, or declined 3 percent on a constant currency basis. In Drug Pumps, the business was negatively affected by challenges related to its April 2015 U.S. FDA consent decree as well as by a recent divestiture of its intrathecal baclofen drug. In addition, Pain Stim and Deep Brain Stimulation (DBS) declined, driven by competitive challenges.
Surgical Technologies fourth quarter revenue of $485 million increased 5 percent, or increased 7 percent on a constant currency basis, with high-teens growth on a constant currency basis in Advanced Energy and high-single digit growth on a constant currency basis in Neurosurgery, offsetting low-single digit declines on a constant currency basis in ENT.
Neurovascular fourth quarter revenue of $159 million increased 20 percent, or 23 percent on a constant currency basis, driven by continued strong growth in stents and flow diversion as a result of customer adoption of the company’s Solitaire(TM) FR revascularization device for the treatment of ischemic stroke, as well as the Pipeline(TM) Flex device in the U.S. and Japan and Pipeline(TM) Shield in Europe for the treatment of intracranial aneurysms.
Diabetes Group
The Diabetes Group includes the Intensive Insulin Management (IIM), Diabetes Service & Solutions (DSS), and Non-Intensive Diabetes Therapies (NDT) divisions. Diabetes Group worldwide fourth quarter revenue of $496 million increased 6 percent, or 10 percent on a constant currency basis. The group had strong, broad-based performance across all three divisions.
IIM grew in the high-single digits on a constant currency basis, driven by continued strong sales in Europe and Asia Pacific of the MiniMed 640G System with the enhanced Enlite sensor and SmartGuard(TM) technology.
NDT grew over 230 percent on a constant currency basis, led by strong U.S. sales of the iPro2 Professional Continuous Glucose Monitor (CGM) technology with Pattern Snapshot.
DSS grew in the high-single digits on a constant currency basis as a result of solid growth of consumables, revenue from the company’s acquisition of Diabeter in Europe, and continued strong growth of the MiniMed Connect, where now over 16,000 people with diabetes are using the product to view their insulin pump and CGM information on a smartphone.
Revenue Outlook and EPS Guidance
The company today provided its initial 2017 revenue outlook and EPS guidance. The company’s baseline goal is to consistently grow revenue in the mid-single digits on a constant currency basis. In fiscal year 2017, given current trends, the company expects constant currency revenue growth to be in the upper-half of the mid-single digit range, which is in the range of 5 to 6 percent and excludes the estimated negative 150 basis point impact from the extra selling week the company had in the first quarter of fiscal year 2016. The company expects a negative impact from foreign currency in fiscal year 2017 of approximately $25 to $75 million based on current exchange rates.
In fiscal year 2017, the company expects non-GAAP diluted EPS in the range of $4.60 to $4.70, which includes an expected $0.20 to $0.25 negative foreign currency impact based on current exchange rates. The company indicated this guidance would imply diluted EPS growth in the range of 12 to 16 percent, after adjusting for the estimated impact of foreign currency translation and the extra selling week in the company’s first quarter of fiscal year 2016.
"As we enter our new fiscal year, we look forward to delivering on our robust pipeline of products and services, expanding our global reach to serve more patients, and partnering with others around the world to develop new value-based business models," said Ishrak. "We believe that Medtronic can play a meaningful leadership role with others in healthcare that can lead to better outcomes for patients, while improving overall healthcare system performance."