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Medtronic maintains full-year profit view, investors doubt growth ability

Medtronic maintains full-year profit view, investors doubt growth ability
By Reuters
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By Amruta Khandekar and Khushi Mandowara

-Medtronic Plc on Tuesday stuck to its 2023 earnings forecast in the face of supply chain shortages and rising costs, raising investor doubts in the device maker's ability to achieve its target at a time when its smaller rivals cut their outlooks.

Shares of Medtronic fell 2.6% in morning trade even though the company said it expected a boost from its new product launches and that organic revenue will grow every quarter in the second half.

The implied step-up in expected growth in the back half is high and there is a tough environment from a number of macro factors, said BTIG analyst Ryan Zimmerman.

Supply chain constraints exacerbated by the Ukraine conflict and strict COVID-19 lockdowns in China have led to shortages of raw materials and key electronic components such as chips, hurting sales of medical devices.

The shortages have weighed heavily on Medtronic's medical surgical unit, which makes vessel sealing and stapling devices. Revenue from the unit fell 14% in the first quarter.

In addition, the company's quarterly earnings took a beating from higher raw materials, labor and transportation costs as well as a stronger dollar.

Macro pressures, including supply chain challenges, have led smaller rivals such as Stryker to lower their profit outlooks for the full year.

Medtronic said it expected chip shortages to linger through its fiscal year. But said it was seeing an improvement in packaging and resin supply.

The company reiterated its full-year adjusted profit forecast between $5.53 and $5.65 per share.

It said medical procedures remained pressured in some markets due to healthcare worker shortages and COVID-related cancellations.

On an adjusted basis, the company earned $1.13 per share in the first quarter, edging past analysts' average estimate of $1.12 per share.

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