The fallout of the coronavirus pandemic drove Medtronic PLC's latest profit and sales sharply lower, the company said Thursday.
The virus has affected everything from end-product demand for medical devices to its supply chain, research and development efforts and the personal safety of employees.
"The novel coronavirus disease 2019 (COVID-19) has had and we expect will continue to have an adverse effect on our business, results of operations, financial condition and cash flows, the nature and extent of which are highly uncertain and unpredictable," Medtronic said.
The company's adjusted profit was $777 million in the three months ended April 24, the fourth quarter of its fiscal year. Medtronic earned $2.1 billion in the same period last year.
That profit amounted to 58 cents a share, down from $1.54 per share a year ago. Analysts were expecting per-share profit of 80 cents.
Revenue was $6 billion, down 25% from a year ago and below the $6.4 billion expected by analysts in a consensus forecast gathered by Yahoo Finance.
The company's non-GAAP operating profit margin halved, to 16.1% from 31.5% in the same period last year. Medtronic shares declined 2.7% Thursday, closing at 95.41
In a call with investors and analysts, Medtronic executives said they expected financial benchmarks to be "modestly worse" in the first quarter of its 2021 fiscal year.
Medtronic's manufacturing facilities may not operate at full capacity in the quarter, Karen Parkhill, the company's chief financial officer said. Elective medical procedures have been put on hold by government directives and patient decisions, she said and also noted some buildup of device inventory among customers.
Pointing to gradual improvements in the company's U.S., Western European and Chinese markets as the pandemic lessens, Parkhill predicted that Medtronic would be back to growth in mid-single digits by its fiscal fourth quarter, which starts in February 2021.
But the company was reluctant to offer specific guidance because of the uncertainty surrounding the pandemic recovery. A resurgence of COVID-19 could play a role, Parkhill cautioned.
Even as its operating performance came under pressure, the company said its board approved an increase in the quarterly dividend paid to shareholders to 58 cents a share from 54 cents previously. That pushed the annual dividend up 16 cents, to $2.32 per share from $2.16.
In his first earnings call as CEO, Geoff Martha praised Medtronic employees for their hard work in difficult circumstances and highlighted Medtronic efforts to provide protective equipment, flexible leave policies and pay guarantees for certain sales employees whose commissions were hurt by slumping sales.
Martha also said a robust cash reserve and credit line, along with newly approved medical devices, will keep the company on solid financial footing. Martha offered a prediction about the legacy of COVID-19: Remote monitoring of devices is now critical, he said. And hospitals could soon make it "standard of care."
In answer to an analyst's question, Martha said the depressed economy might allow for Medtronic to consider mergers and acquisitions.
As Martha took over, former CEO Omar Ishrak said goodbye. Noting that it was his 36th Medtronic earnings call, Ishrak said he "didn't expect to turn over the CEO role during a pandemic."
But he offered this observation: "Health care is a perpetual opportunity."
Jim Spencer • 202-662-7432
