CHICAGO/NEW YORK (Reuters) - Medtronic Inc’s (MDT.N) new chief executive vowed to expand more internationally and improve returns from the company’s research spending as he seeks to revive growth at the world’s largest medical device maker.
CEO Omar Ishrak, a former General Electric Co (GE.N) executive, also said the company would seek to become more efficient. He remained committed to returning cash to shareholders, while exploring smaller acquisitions.
Ishrak’s comments, on the company’s first-quarter conference call, gave the first glimpse of his strategy since he took the helm in June. Medtronic reported quarterly results that met analysts’ estimates and it backed its fiscal-year revenue and profit views.
Medtronic shares rose 1.8 percent in premarket trading.
The company is struggling with its important markets for selling heart defibrillators and spine products, and Ishrak said those problems will persist.
“While we expect our ICD (implantable cardioverter defibrillators) and spinal markets will be under pressure this year, we do expect the rest of our portfolio to continue to generate growth,” Ishrak said on the conference call with analysts.
Emerging markets represent 10 percent of revenue, and Ishrak said he believes growth rates of 20 percent are sustainable.
Ishrak said the returns on research and development have been “unsatisfactory,” and will require “major changes.”
Analysts have speculated that Medtronic may sell some of its businesses, but Ishrak said the company had good diversification.
First-quarter net income was $821 million, or 77 cents a share, compared with $830 million, or 76 cents a share, a year ago.
Excluding special items, earnings of 79 cents per share matched the average estimate of analysts, according to Thomson Reuters I/B/E/S.
First-quarter revenue rose 7 percent to $4.05 billion, or 2 percent after adjusting for a favorable currency impact. Analysts looked for $3.98 billion.
“No one is having a party for 2 percent revenue growth, but at least it was in line with what people were thinking,” said Jefferies & Co analyst Raj Denhoy.
“It’s been a long several years as far as improving revenue growth, and what investors are looking for is a turn in that top-line performance.”
Revenue for Medtronic’s ICDs fell 8 percent to $697 million. Spinal revenue was unchanged at $825 million.
Medtronic is struggling with weak demand and pricing in ICDs and spine products. Analysts expect further sales declines for the company’s controversial Infuse bone growth stimulant used in spine surgery following allegations in a medical journal that researchers hid serious complications.
Medtronic said Infuse revenue declined 8 percent in the quarter.
Diabetes revenue grew 14 percent, surgical technologies increased 13 percent, while its cardiovascular unit that includes stents and other products rose 19 percent.
Medtronic still expects fiscal-year earnings in the range of $3.43 to $3.50 per share, including about 4 cents to 6 cents of dilution from an acquisition. Analysts are looking for $3.45.
It also backed its revenue forecast calling for growth in the range of 1 percent to 3 percent on a constant currency basis.
Company shares slumped to a one-year low in early August and are off about 16 percent this year, compared to a decline of about 9 percent for the Standard & Poor’s 500 Index. They were up 2.7 percent at $32 on the New York Stock Exchange.
Reporting by Susan Kelly and Lewis Krauskopf; Editing by Derek Caney