Medtronic, the world's largest medical device maker, reports earnings for the second fiscal quarter of 2010 on Tuesday. The following is a summary of key developments and analyst opinion for the last period.
OVERVIEW: Last week Medtronic said it had received a warning letter from the Food and Drug Administration about quality control problems at the Minnesota headquarters of its heart-pacing device unit.
FDA inspectors found several issues with the company's procedure for documenting and reporting problems with the devices. In May Medtronic recalled thousands of pacemakers due to a wiring defect that made them unresponsive or caused them to run out of battery power.
Sales growth for the company's cardiac-pacing division, its largest, have been slowing on a combination of safety concerns and reduced spending by hospitals.
Medtronic said revenue from heart rhythm devices rose 3 percent to $1.34 billion in the last quarter, including $775 million in sales of implantable cardioverter defibrillators, the company's best-selling products. Defibrillators use electrical shocks to correct abnormal heart beats that could be deadly. The company also sells pacemakers, which use low-voltage electrical currents to keep weak hearts beating.
BY THE NUMBERS: Analysts surveyed by Thomson Reuters expect earnings per share of 74 cents on revenue of $3.7 billion for the quarter.
ANALYST TAKE: Wall Street will pay particularly close attention to sales of heart rhythm devices, following weaker-than-expected sales by competitors Boston Scientific Corp. and St. Jude Medical. St. Jude saw sales decline, while Boston Scientific seemed to resort to price cuts to keep sales moving, according to Lazard Capital Markets analyst Sean Lavin.
"We find it unlikely that Medtronic could be completely unaffected," said Lavin, in a note to investors.
WHAT'S AHEAD: Sales of Medtronic's core products continue to tread water, and Levin says they will not grow until upcoming launches of new heart and spine implants.
"We do believe new products in both over the next few years could bring growth to these product lines, but we believe investors can remain patient," Lavin states.