Medtronic (MDT) 1Q17 Earnings Call Notes

Product pipeline remains strong in all business segments

“Across all four of our groups, CVG, MITG, RTG and Diabetes, our new product pipeline is robust and we’re confident we can drive sustainable growth of our new therapies growth vector within our 200 to 350 basis point goal.” Omar Ishrak – Chairman & CEO


Emerging markets are a the biggest long-term opportunity for med tech

“Overall however, the consistency of our emerging market performance benefits strongly from increased geographic diversification reducing dependence on any single market. We continue to believe strongly that the penetration of existing therapies into emerging markets represents the single largest opportunity in med tech over the long term.” Omar Ishrak – Chairman & CEO


Heartware acquisition offers a better return on investment than R&D

“we had a number investments internally going on in R&D programs directed specifically at heart failure… we basically are reallocating resources and people to support the activities within HeartWare and backing off on some of those because we actually think HeartWare return on investment will be even better.” Mike Coyle – President, Cardiac and Vascular Group


Diversity of MDT portfolio allows for even organic growth despite geographic or categorical weaknesses

“one of our main strength is the diversity of not only our portfolio but our geographic presence as well as the nature of the sources of revenue that we have from emerging markets from services solutions and new therapies. And that by definition means that there will be areas which are strong one quarter and week in others but overall we’re pretty confident, very confident that we can maintain even just organically the mid-single-digit range within the full range of mid single-digits. We expect acquisition to supplement that” Kevin Miller


MDT takes advantage of interest rate environment to fund acquisitions and R&D, while staying committed to dividend and share repurchase policy

“obviously one of the key things that we had been doing in an ultra-low rate environment was focused on efficiency and driving strong bottom-line. And so that’s exactly what we’ll be doing here. In terms of capital deployment, I think the highest and best use of our capital is to grow the intrinsic value of the company through reinvestment first and foremost, but beyond that I think it’s very important to have a dividend that is strong and… pay back to our shareholders through share repurchase and that’s exactly what we’re doing with our commitment to deliver a minimum of 50% of our free cash flow to our shareholders” Karen Parkhill – CFO


CEO Omar Ishrak is very optimistic on healthcare and med-tech industry

“If you look at it both from a medical innovation perspectives, the number of problems that have to be solved that patients will value, that create a real difference in people’s lives driving equity in healthcare around the world. The opportunities there are again limitless and we’re just scratching the surface and then on top of that you know like we’ve talked about the challenge of addressing wastage in healthcare where we’re literally wasting across the world hundreds of billions of dollars in total healthcare spend… not one that should ever be a down market if we as players and stakeholders in the healthcare market can get our heads around this”. Omar Ishrak – Chairman & CEO