Medtronic, one of the country's largest medical technology, services and solutions companies, saw revenue climb in its second quarter while earnings suffered because of the acquisition of Covidien in January.
The deal meant Medtronic relocated its headquarters from Minneapolis to Dublin, Ireland, where Covidien, a surgical-device maker was located. That will ultimately reduce Medtronic's tax burden, but in the second quarter, the company diluted its net income with a one-time tax adjustment.
Revenue was up to $7 billion, a 6% increase from $4 billion a year ago. U.S. sales alone account for 58% of this quarter's revenue, the company reported on Thursday. Revenue would have been about $452 million higher if not for negative foreign currency impacts, according to a news release.
“Despite our strong performance, we recognize foreign currency translation is a significant pressure to our bottom line on a reported basis,” Medtronic CEO Omar Ishrak said in a conference call with reporters. “But we're attempting to offset this as much as possible by stretching our operations and through our conventional hedging programs.”
For its second quarter ended Oct. 30, Medtronic posted a profit of $520 million down from $828 million a year ago, due to a hefty increase in taxes.
“Our operational performance remains consistent and sustainable across all our groups and regions,” Ishrak said. “At the same time, we're outperforming the overall market and delivering operating leverage.”
Looking ahead for the second half of fiscal 2016, Medtronic said it expects revenue growth, but also anticipates setbacks from foreign currency exchange rates of approximately $425 million to $725 million. Based on fiscal 2016 results so far, the company said it expects adjusted earnings in the range of $4.33 to $4.40, compared to $4.30 to $4.40 previously.
“As we look ahead though, our confidence continues to grow around our ability to develop the right mindset, business models and offerings to lead and compete in the emerging value-based healthcare models around the world,” Ishrak said.