Medtronic misses revenue estimates, warns of coronavirus impact

By Saumya Joseph and Mrinalika Roy

(Reuters) - Medtronic Plc <MDT.N> on Tuesday reported a rare miss in quarterly revenue as demand for its heart devices fell ahead of new launches, and said it would take a hit from the coronavirus outbreak due to delays in hospital procedures in China.

Shares of the world's largest standalone medical device maker fell 4% to $112.53 in early trading.

Medtronic is the latest company to announce a potential impact to its financial results from the outbreak which has disrupted supply chains and delayed reopening of factories in China.

Although its manufacturing operations in the country were up and running, Medtronic expects a negative impact from a slowdown in medical device procedures in the region.

"Given the fluidity of this situation, the duration and magnitude of the impact are difficult to quantify at this time," Chief Executive Officer Omar Ishrak said on a conference call.

Medtronic said it will monitor and assess the impact to its business from coronavirus and provide an update later in the quarter.

China is a key growth area for the company, housing multiple manufacturing and research facilities with about 7,000 employees, and is expected to contribute to nearly 7% of Medtronic's revenue this year.

Third-quarter sales at the company's largest units fell short of estimates from loss of medical procedures due to an upgradation of its supply chain system and as customers held off on buying products ahead of new launches.

Sales at Medtronic's top-earning heart devices unit rose 1.2% to $2.82 billion(£2.16 billion), coming in below the average estimate of $2.86 billion, according to five brokerages polled by Refinitiv.

"Even though much of it was transient...we did not perform at the level we were expecting... We just can't have surprises like this, for us, nor for you. And we are making changes," said Geoffrey Martha, who will succeed long-time CEO Ishrak in April.

SVB Leerink analyst Danielle Antalffy questioned whether the issues the company faced during the quarter were indeed "transient", given Medtronic continues to suffer share losses in areas such as the lucrative transcatheter heart valves market.

The company's string of small acquisitions to bolster its restorative therapies business helped the unit grow 4.2% to $2.11 billion revenue, but it missed consensus estimate of $2.12 billion, on slowing demand for its pain therapies.

Excluding items, Medtronic earned $1.44 per share, beating consensus estimate of $1.38 per share. Net sales rose 2% to $7.72 billion, missing estimates of $7.81 billion.

(Reporting By Mrinalika Roy and Saumya Sibi Joseph in Bengaluru; Editing by Shinjini Ganguli)