International growth helps Medtronic beat estimates

After almost a year in charge at Medtronic Inc., Chief Executive Omar Ishrak is pushing forward with his focus on "accelerating globalization."

The Fridley-based medical technology giant said Tuesday that international sales grew 11 percent last year, to $7.4 billion, and now make up 46 percent of the company's business. While Medtronic has been cutting jobs as part of a restructuring, it plans to add back 1,500 globally in the 2013 fiscal year.

"Some of what's going on here is we're shifting resources from the U.S. market to the markets that are growing," Chief Financial Officer Gary Ellis said. Those resources including expanding research and development and manufacturing jobs in those markets.

In reporting quarterly results that came in ahead of analysts' expectations, Medtronic said revenue from emerging markets jumped 19 percent to $463 million. Emerging markets now account for 11 percent of Medtronic's revenue and company officials said they expect revenue from those markets to be 20 percent of the company's total take in the next few years.

Thom Gunderson, an analyst for Piper Jaffray & Co., said Medtronic's strategy makes sense. Medtronic is a large company with a varied line of new devices that already are selling well overseas but still are waiting for regulatory approval in the U.S., he said.

"They're going to international markets because that's where their ability is to gain a little more share and gain a little bit more growth," Gunderson said. "It doesn't carry the whole company, but it's where the growth is. And you've got to go where the growth is."

Company officials confirmed Tuesday that Medtronic will cut about 1,000 jobs worldwide in fiscal 2013, which started at the end of April. That includes about 250 positions in the Twin Cities.

In all, the net effect will be that Medtronic will reduce positions in the Twin Cities, stay flat throughout the rest of the U.S. and increase its workforce in international and emerging markets.

Ishrak said in an interview Tuesday that Medtronic is sustaining hearty growth in international and emerging markets across its product line.

"I am pleased with our improved revenue growth this quarter in a dynamic health care environment," he said. "Our growth was broad-based across our businesses and geographies, including strong U.S. launches of the Resolute Integrity drug-eluting stent and RestoreSensor spinal cord stimulator and strong growth in emerging markets. As we continue to focus on innovation, globalization, and execution, I see many opportunities for improved growth."

It is not just the overseas and emerging market growth driving the fourth quarter results, however. Israk and Ellis noted that the company's traditional core business, domestic sales of pacemakers and defibrillators, has shown improvement after a prolonged downward trend.

Defibrillator revenue fell 2 percent in the fourth quarter -- but that compares with a 14 percent decline last quarter. U.S. sales of Medtronic's Resolute Integrity drug-coated stent helped the company double its U.S. market share of like devices.

Medtronic reported fourth quarter net earnings of $991 million, or $0.94 per diluted share, an increase of 28 percent over the company's fourth quarter of 2011. For its fiscal year 2012, Medtronic reported net earnings of $3.62 billion, or $3.41 per diluted share. Those were increases of 17 percent and 19 percent over the previous year.

Looking ahead to fiscal 2013, Medtronic officials said they anticipate revenue to grow from 2 to 4 percent, with earnings per share to climb 5 to 7 percent.

Medtronic shares dropped 74 cents to $36.96.