Medtronic Keeps to Fiscal Targets

Revenue totaled $2.69 billion in the latest quarter.
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Updated from 4:45 p.m. EDT

Medtronic

(MDT) - Get Report

issued first-quarter earnings on Wednesday that narrowly beat analysts' expectations as revenue edged past the consensus prediction.

Excluding charges, the medical device giant earned $615.9 million, or 50 cents a share, on revenue of $2.69 billion. Analysts polled by Thomson First Call were expecting a first-quarter profit of $598.9 million, or 49 cents a share, on sales of $2.67 billion.

"Medtronic entered this fiscal year with very solid momentum and we are pleased to see that momentum continue through the first quarter," said Art Collins, chairman and CEO, in describing the three-months that ended July 29.

On a GAAP basis, Medtronic earned $320.6 million, or 26 cents a share, compared with a profit of $529.7 million, or 43 cents a share, last year. The previous year's first quarter produced revenue of $2.35 billion.

The GAAP results were affected by a $363.8 million in pretax charges related to the recent acquisition of a medical device company,

Transneuronix

, a licensing agreement with another company and the purchase of certain intellectual property to settle a patent dispute involving spine products.

In addition, Medtronic reaffirmed its fiscal year guidance that earnings per share would be in the range of $2.10 to $2.15 and that revenue would be in the range of $11.1 billion to $11.6 billion. Considering the performance so far and the prospects for new products, Gary Ellis, the chief financial officer, said results will be in the "higher end" of the EPS and revenue ranges.

For the fiscal year, the Wall Street consensus calls for an EPS of $2.15 and revenue of $11.45 billion.

Ellis told analysts during a telephone conference call that he was reiterating guidance for fiscal 2007, with EPS between $2.37 and $2.47 and revenue in a range of $12.2 billion and $13.3 billion. He also repeated fiscal 2008 guidance, with EPS of $2.70 to $2.90 and revenue between $14 billion and $16 billion. All EPS predictions exclude the effect of special charges or mandatory stock option expensing.

During the quarter, Medtronic got the biggest boost from its biggest business. Sales of implantable cardioverter defibrillators, or ICDs, rose 30% to $718 million. Medtronic is the market leader for these surgically implanted devices that deliver electric shocks to control rapid, erratic heartbeats.

Ellis said ICD growth won't continue at such a high level, adding that 20% is a more likely rate. Medtronic's competitors are

Guidant

(GDT)

and

St. Jude Medical

(STJ)

.

Another big gainer was the spine products business, whose sales rose 24% to $504 million. Ellis said this growth rate was higher than the expected rate of mid-teens to 20%.

One unit that can expect greater growth is the vascular products business, whose sales rose 5% to $205 million. But that excludes the Endeavor drug-coated stent, which was approved by the European Union on July 31.

Medtronic is battling

Johnson & Johnson

(JNJ) - Get Report

and

Boston Scientific

(BSX) - Get Report

who sell their stents in the most lucrative market -- the U.S. -- as well as many foreign markets.

Analysts expect Endeavor to reach the U.S. market in 2007. Medtronic is still conducting clinical trials to secure approval by the Food and Drug Administration.

The financial results were issued after markets had closed. In regular trading, Medtronic's stock was off 8 cents to $54.57. The stock slipped 2 cents in after-hours trading.