Medtronic Chairman and CEO Omar Ishrak
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Medtronic missed estimates for third-quarter revenue on Tuesday as its heart device unit reported a slowdown in demand ahead of new product launches, and warned of a hit to its fourth quarter from the coronavirus outbreak.
Shares of the world’s largest standalone medical device maker fell 2% to $114.70 in trading before the bell.
Medtronic is the latest company to announce a potential impact to its financial results from the virus outbreak which has confined millions to their homes, disrupting supply chains and delaying reopening of factories in China.
“The situation is fluid and the duration and magnitude of the impact are difficult to quantify at this time,” the company said in a statement.
Medtronic said it will monitor and assess the impact to its business from coronavirus that has claimed nearly 1,900 lives, and provide an update later in the quarter.
The company has multiple manufacturing and research facilities across China, which employs nearly 7,000 people and is expected to contribute to nearly 7% of Medtronic’s revenue this year.
Sales at Medtronic’s biggest unit which makes heart valves and pacemakers rose 1.2% to $2.82 billion in the third quarter, accounting for 36.5% of total revenue.
Analysts were expecting sales of $2.86 billion, according to five analysts polled by Refinitiv.
The company’s recent small acquisitions, including its $1.64 billion buyout of Mazor Robotics in 2018, have benefited its restorative therapies and spinal robotics unit.
The unit reported revenue of $2.11 billion in the third quarter, just below the consensus estimate of $2.12 billion, as demand for its pain therapies continued to slow.
Chief Executive Officer Omar Ishrak said in a statement that significant margin expansion resulted in better-than-expected earnings per share and free cash flow.
Net income attributable to the company rose 51% to $1.92 billion, or $1.42 per share, as the company benefited from a $340 million tax gain.
Excluding items, Medtronic earned $1.44 per share, beating the average analysts’ expectation of $1.38 per share, and net sales rose 2% to $7.72 billion, missing estimates of $7.81 billion.