UPDATE 3-Medtronic net up as ICDs shine; outlook cautious

* Q4 EPS ex-items $0.90 vs. Wall St view $0.88

* Q4 revenue rises 10 percent to $4.2 billion

* Sees fiscal 2011 EPS $3.45-$3.55

* Shares fall 3.1 percent
(Adds CEO comments from interview, updates share activity)

By Susan Kelly

CHICAGO, May 25 (BestGrowthStock) – Medtronic Inc (MDT.N: ) reported
a sharp rise in quarterly earnings on Tuesday as sales of its
implantable heart defibrillators benefited from rival Boston
Scientific Corp’s (BSX.N: ) one-month recall.

The higher-than-expected profit at the largest stand-alone
medical device maker came despite a tepid performance in its
spine and pacemaker divisions. Its shares fell more than 3
percent as U.S. markets slid and the company gave a cautious
outlook.

The quarter was “plain vanilla, right on track,” Wedbush
Securities analyst Phil Nalbone said, although “the very weak
performance in spine and pacemakers should give investors some
pause.”

Earnings for the fourth quarter ended on April 30 rose to
$954 million, or 86 cents a share, from $103 million, or 9
cents a share, a year earlier.

Profit of 90 cents a share, which excludes a hit from the
new U.S. health reform legislation and other one-time items,
was 2 cents ahead of the analysts’ average estimate, according
to Thomson Reuters I/B/E/S.

Revenue rose 10 percent to $4.20 billion, exceeding
analysts’ estimates of $4.19 billion. On a constant currency
basis, sales increased 6 percent.

Revenue from implantable cardioverter defibrillators, or
ICDs, to treat rapid heart rhythms rose 10 percent to $881
million on a constant currency basis, while pacemaker revenue
declined 4 percent to $495 million.

Boston Scientific temporarily stopped U.S. shipments of all
of its ICDs in mid-March after failing to submit paper work on
manufacturing changes to regulators.

Medtronic said it had gained 5 percentage points of U.S.
ICD market share in the quarter as a result of its rival’s
woes.

“When they were off the market, we got about two-thirds of
what was up for grabs,” Medtronic Chief Executive Officer Bill
Hawkins said in an interview. “As they’ve gotten back into the
marketplace, we’ve maintained some of that. Our sense is that
we’ve retained a disproportionate share of what Boston could
have lost permanently.”

Revenue from cardiovascular products, including stents to
treat clogged arteries, increased 12 percent to $757 million on
a constant currency basis, while spine product sales fell 2
percent to $880 million.

Neuromodulation revenue rose 4 percent to $411 million, and
revenue from diabetes products increased 8 percent to $332
million.

The company said it expected new products to restart growth
in both its pacemaker and spine businesses.

A new MRI-safe pacemaker is awaiting U.S. Food and Drug
Administration approval, but the timing of the rollout will
depend on when the agency re-inspects Medtronic’s manufacturing
plant and lifts a warning letter on the facility.

Hawkins said Medtronic expected the spine unit to return to
upper single-digit percentage growth in the United States
toward the end of the year.

Until a turnaround at the unit takes hold, he said, the
company is more comfortable with the lower end of its profit
forecast.

Medtronic said it expected fiscal 2011 earnings of $3.45 to
$3.55 a share, while analysts on average were expecting $3.52.
The company forecast revenue growth of 5 percent to 8 percent
on a constant currency basis.

Shares of Medtronic were down 3.1 percent at $39.38 in
morning New York Stock Exchange trading.

Investing Advice

(Reporting by Susan Kelly in Chicago and Lewis Krauskopf in
New York; editing by Maureen Bavdek and Lisa Von Ahn)

UPDATE 3-Medtronic net up as ICDs shine; outlook cautious