VOL. 123 | NO. 108 | Tuesday, June 3, 2008
Medtronic Expects Growth From International Sales
NEW YORK (AP) - Medical device maker Medtronic Inc. expects booming international markets, including Russia and China, to help drive up to 14 percent earnings growth and 11 percent sales growth annually to 2013.
The company, whose spinal and biologics business is based in Memphis, presented its outlook at its annual analyst day Monday, in which it also laid out plans to generate between $20 billion and $22 billion in free cash flow over five years and return between 40 percent to 50 percent of that to shareholders annually.
Also, Medtronic expects earnings per share to rise between 11 percent and 14 percent annually.
In May, the company presented signs of that revenue growth when it reported a fourth-quarter sales increase of 18 percent to $3.86 billion. Profit rose slightly, bogged down by restructuring charges and the lack of a tax gain seen a year prior.
In fiscal 2009, the company expects profit of $2.94 to $3.02 per share on revenue of $15 billion to $15.5 billion, compared with profit of $1.95 per share on revenue of $13.52 billion in fiscal 2008. The fiscal year ends in April.
Analysts polled by Thomson Financial expect profit of $2.98 per share on revenue of $15.25 billion.
In its presentation, the company said it expects double-digit sales growth in the majority of its product categories, including stents and heart devices, spine devices and diabetes treatment product.
International sales will outpace U.S. sales, with 10 percent to 13 percent increases, versus 8 percent to 10 percent boosts. Specifically, the company expects a 40 percent increase in sales to China and a 45 percent increase in the Russian market. Medtronic expects 25 percent sales increases each in Brazil, India, and South Korea.
Medtronic Chief Executive Bill Hawkins said the slowdown in U.S. market growth is due mainly to saturation. Whereas hospitals and physicians in the U.S. have an abundance of devices and technology, the same is not true for China.
"And the incidence of heart disease is no less in the U.S. than it is in other countries," Hawkins said.
Goldman Sachs analyst Lawrence Keusch said Medtronic can control general expenses, cut jobs and focus its research and development spending on more profitable areas and projects. He rates the stock "Buy," with a price target of $57 per share.
Meanwhile, UBS Investment Research Bruce Nudell also reaffirmed a "Buy" rating.
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