Medtronic
(NYSE:MDT)
announced today that it will exit what it describes as its increasingly unprofitable ventilator product line.
The move comes more than a year after Medtronic said it would spin off its Patient Monitoring and Respiratory Interventions businesses, part of its Medical Surgical portfolio. Reports last year claimed that other medtech companies, including GE HealthCare and ICU Medical, and the private equity firm Carlyle Group were among those considering a purchase of the businesses.
In the end, Medtronic’s leadership decided instead to end the ventilator business, combining what remains of Patient Monitoring and Respiratory Interventions into one business unit called Acute Care and Monitoring (ACM). The company said in a news release: “Given this increased investment along with an improved competitive landscape, the company has strong conviction in driving durable category leadership in this newly combined business.”
The news and accompanying Street-beating Q3 results sent MDT shares up more than 3% to $87.58 apiece in pre-market trading.
Manufacturing ventilators placed Medtronic on the front lines of the COVID-19 pandemic. In 2020, the medtech giant announced partnerships to boost production and even publicly shared the design specifications of its Puritan Bennett 560 (PB 560) ventilator amid a global shortage.
Medtronic said today that it will honor existing ventilator contracts. It said that existing manufacturers, who account for most of the existing market, can meet health providers’ demand for new ventilators in the future.
Doing away with the ventilator business is another example of how Medtronic leaders are seeking to demonstrate a focus on profitability to investors. CEO Geoff Martha in January detailed how the company was closing at least five manufacturing sites, consolidating distribution centers, and stopping doing business with approximately 200 suppliers as part of a push to improve its operations and supply chain.
Medtronic beats The Street in Q3 and boosts guidance
Medtronic earned $1.3 billion, or 99¢ per share, off of $8.1 billion in sales for the quarter ended on Jan. 26, 2024. The bottom line was up 8.8% and the top line was up 4.7% compared with Q3 2023.
Adjusted to exclude one-time items, Medtronic’s EPS was $1.30. The result was 4¢ ahead of the consensus of Wall Street analysts, who expected EPS of $1.26 and revenue of $7.95 billion.
“We’re building momentum, with another quarter of solid execution on our commitments. We continue to deliver durable revenue growth, with particular strength in multiple businesses, as well as in international markets as we expand access to our innovative healthcare technologies around the globe,” Martha said in a news release. “Our recent major product approvals — including transformative products in the diabetes, cardiac rhythm management, neuromodulation, hypertension, and pulsed field ablation spaces — increase our confidence in driving reliable growth over the coming quarters and years.”
The company boosted its full-year organic revenue growth guidance from the prior 4.75% to the new range of 4.75% to 5%. It also increased full-year non-GAAP EPS guidance from the prior range of $5.13 to $5.19 to the new range of $5.19 to $5.20.