Medtronic, Inc. (MDT): Three Need-to-Know Takeaways From Earnings

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It was show time for Medtronic, Inc. (NYSE:MDT) and medical device investors yesterday, as the world’s largest pure medical device maker reported its first-quarter results of the 2014 fiscal year.

Medtronic, Inc. (NYSE:MDT)

Overall, Medtronic, Inc. (NYSE:MDT) pulled off a mixed bag of a quarter, as the company’s top line slumped by 3% year-over-year to fall short of analyst expectations. To counteract that, Medtronic, Inc. (NYSE:MDT)’s net income jumped 10% over 2013’s first quarter, and an adjusted EPS score of $0.88 matched average projections for the company. That wasn’t enough to save Medtronic, Inc. (NYSE:MDT)’s stock from a sharp 2.4% decline on the day, however, a big stumble for shareholders who have gotten used to the stock’s 28.8% year-to-date gains.

Let’s take a deeper look beyond the broad numbers, however, to see just where Medtronic, Inc. (NYSE:MDT)’s leading — and lagging — in the device industry. Here are three key takeaways from this device giant’s quarter.

High-growth fields on the rise
Even with Medtronic, Inc. (NYSE:MDT)’s sales taking a hit, the company’s making solid progress on some innovative areas that investors need to watch.

Medtronic’s neuromodulation sales climbed 3% for the quarter, a modest but welcome increase for a business that’s been picking up across the industry. The segment isn’t Medtronic’s largest, or even close — it only pulled in $428 million for the quarter, around 60% of what the company generated in spine product sales. Still, neuromodulation products have been on the rise around other leading device makers. Stryker Corporation (NYSE:SYK)‘s one of the top names in devices, and its neurotech business pulled in nearly 7% growth in the company’s most recent quarter, and if Medtronic can match those kind of numbers in the future, neuromodulation will become a major part of this company’s Restorative Therapies division.

Shifting business segments, Medtronic’s CoreValve heart valve has garnered a lot of attention recently, particularly as the company battles rival Edwards Lifesciences Corp (NYSE:EW) and its Sapien valve in legal and sales fights. That didn’t keep this device down, however, as the CoreValve helped Medtronic’s small but high-growth Structural Heart segment pull in 12% operational growth for the quarter.

CoreValve has a long way to go to match Edwards Lifesciences Corp (NYSE:EW)’s Sapien — after all, the latter’s the only product in the industry to be approved in the U.S., leaving Medtronic’s device to fight for European and other international sales so far. However, the Sapien’s sales have slowed in recent quarters, and if Medtronic can take advantage of Edwards’ declining momentum, the CoreValve might become a real star for this company in future quarters.

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