Medtronic Finally Beats the Street

After two years of matching earnings estimates, the company outdoes the consensus by 2 cents a share.
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Updated from 5:02 p.m. EDT

After eight consecutive quarters of matching Wall Street earnings predictions,

Medtronic

(MDT) - Get Report

reported Monday that it beat analysts' estimates by 2 cents a share on strong gains in market share.

The Minneapolis-based medical device giant said after the bell Monday that fourth-quarter earnings rose to $568.9 million, or 47 cents a share, from $487.1 million, or 40 cents a share, a year ago.

Revenue rose to $2.67 billion from $2.15 billion.

The latest quarterly results included a one-time charge related to an acquisition. Excluding the charge, Medtronic earned $586.1 million, or 48 cents a share, for the fourth quarter.

Analysts polled by Thomson First Call were predicting earnings of $561.3 million, or 46 cents a share, on revenue of $2.46 billion.

The stock was up 65 cents to $48 in after-hours trading after closing down 31 cents to $47.35 in the regular session.

Medtronic also said it expected earnings and earnings per share to grow 15% for the current fiscal year. The company said it would provide revenue guidance in mid-to-late June.

"Market share gains and accelerating growth across all operating segments fueled an especially strong performance in the quarter," said Art Collins, the company's chairman and chief executive.

Collins, who noted that Medtronic created more new products last year than at any time in its history, said "the momentum should continue." Medtronic is well-positioned because, unlike certain competitors, "we are not counting on one product platform or business."

The fourth-quarter results put the finishing touches on a fiscal year in which the company earned $1.96 billion, or $1.60 a share, including charges, on revenue of $9.09 billion. That compares with earnings of $1.6 billion, or $1.30 a share, on revenue of $7.67 billion for the prior fiscal year.

When charges are excluded, the company earned $2 billion, or $1.63 a share, for the latest fiscal year. The Thomson First Call consensus for the fiscal year ended April 30 was for earnings of $1.97 billion, or $1.62 a share, on revenue of $8.88 billion.

During a Monday conference call with investors and analysts, Collins said that although he cannot reveal upcoming test results of the company's drug-coated arterial stent, he said he remained enthusiastic about the device's safety, efficacy and expected timetable.

That means the device could reach the U.S. market next year, according to company and analysts' estimates. Medtronic expects to introduce its drug-coated stent in Europe by the end of 2004. The company has predicted the stent could add $1 billion in sales and earnings of 35 cents a share during its first full year on the market.

The results for Medtronic's Endeavor drug-coated stent are scheduled to be released in Paris during the week.

If Medtronic meets its goals and timetable, it would become the third company to market these stents, which are inserted into arteries to ease the flow of blood and reduce the risk of heart disease and heart attack.

Johnson & Johnson's

(JNJ) - Get Report

Cypher stent reached the U.S. market 13 months ago, and

Boston Scientific's

(BSX) - Get Report

Taxus stent entered the U.S. market in March. Both companies also sell drug-coated stents in foreign markets.

Guidant

(GDT)

, which has been the U.S. market leader in bare metal stents, also is working on a drug-coated stent.

Medtronic's biggest division -- cardiac rhythm management -- enjoyed a 22% fourth-quarter revenue gain to $1.25 billion and a full-year growth of 17% to $4.24 billion. Most notable was the 34% increase in sales of implantable cardioverter defibrillators (ICDs), which deliver electrical shocks to correct dangerous rapid heartbeats. Worldwide pacemaker revenue gained 11% during the quarter.

Among other divisions, cardiac surgery posted a 22% fourth-quarter revenue gain, while revenue grew 22% in the neurological and diabetes division. The company's division that encompasses spinal, ear, nose and throat; and surgical navigation technologies posted a revenue gain of 36% for the fourth quarter.