CRM sales fall, unsurprisingly
No player in the cardiac rhythm management industry is safe — and Medtronic’s earnings show it’s not immune to a declining market. Sales in its cardiac rhythm disease management, or CRDM, segment fell 1% on a constant currency to just under $1.72 billion for the quarter. This small decline is actually much better than many of Medtronic’s CRM competitors are faring; Boston Scientific Corporation (NYSE:BSX) lost 7% in CRM revenue over the full year in 2012, while St. Jude Medical, Inc. (NYSE:STJ) took a 6% year-over-year hit in CRM sales in its most recent quarter.
Things could be a lot worse for Medtronic given the fares of its competitors. However, the company would be better off minimizing its exposure to this toxic industry; the CRM market is already saturated in advanced economies, with little room for growth in the near future. Fortunately, Medtronic’s other businesses are making up for this segment’s losses.
Drug-eluting stents are powering the new wave of growth at Medtronic, as coronary revenue grew by 19% on a common currency. Stent sales themselves picked up 42%, performing exceptionally well in growing market share in Japan. Rivals such as Boston Scientific and Abbott have poured money into drug-eluting stent research recently, and Medtronic would be wise to keep stretching for solid growth in this lucrative market.
Medtronic’s neuromodulation sales also saw good growth with revenue rising 7%. This is another industry where competitors have managed to capture growth despite losses elsewhere; Boston Scientific, in particular, saw 9% growth in its neuromodulation business to lead all divisions. Stryker Corporation (NYSE:SYK)‘s neurotechnology and spine unit, a major competitor of Medtronic’s, also saw around double-digit growth this past quarter. Medtronic’s own spine revenue fell 3% for the quarter, but the company’s “Core Spine” revenue, which makes up the majority of the division’s sales, remained flat as U.S. physicians continue to accept the company’s products. Further experience with Medtronic’s products in the medical community will only help the division’s sales rise in the future.
Medtronic’s steady march forward
Investors weren’t too pleased with Medtronic’s conservative guidance and modest growth, but there are plenty of reasons for optimism. Sagging CRM sales aside, many of the company’s divisions are growing at a healthy pace, and even the fall in spine sales shouldn’t be a cause for concern. While Europe continues to be a problem for the medical device sector at large, Medtronic’s expansion in emerging markets will help the company and reward investors in the long run. The third quarter wasn’t a home run for Medtronic, but it was a base hit that will continue to secure this company’s spot among the top medical device players in the world.
The article Europe, CRM Woes Can’t Subdue Medtronic’s Earnings originally appeared on Fool.com and is written by Dan Carroll.
Fool contributor Dan Carroll has no position in any stocks mentioned. The Motley Fool owns shares of Medtronic.
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