Medtronic Inc. Earnings Cheat Sheet: Margins Suffer for Five Quarters Straight, but Net Income Climbs

S&P 500 (NYSE:SPY) component Medtronic Inc. (NYSE:MDT) reported its results for the second quarter. Medtronic provides products and therapies for medical professionals.

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Medtronic Earnings Cheat Sheet for the Second Quarter

Results: Net income for Medtronic Inc. rose to $871 million (82 cents per share) vs. $566 million (52 cents per share) in the same quarter a year earlier. This marks a rise of 53.9% from the year earlier quarter.

Revenue: Rose 3% to $4.1 billion from the year earlier quarter.

Actual vs. Wall St. Expectations: MDT reported adjusted net income of 84 cents per share. By that measure, the company beat the mean estimate of 82 cents per share. Analysts were expecting revenue of $4.07 billion.

Quoting Management: “I’m pleased we delivered another quarter of consistent growth in a difficult environment,” said Omar Ishrak, Medtronic chairman and chief executive officer. “A majority of our businesses, and nearly all of our geographies, contributed to this growth. As we continue to focus on innovation, globalization, and execution, I see tremendous opportunities for growth in the future.”

Key Stats:

Last quarter marked the fifth straight quarter that the company saw shrinking gross margins as gross margin fell 0.1 percentage point to 75.3% from the year earlier quarter. Over that time, margins have contracted on average 0.8 percentage point per quarter on a year-over-year basis.

Revenue has risen the past four quarters. Revenue increased 7.3% to $4.05 billion in the first quarter. The figure rose 2.4% in the fourth quarter of the last fiscal year from the year earlier and climbed 2.9% in the third quarter of the last fiscal year from the year-ago quarter.

Last quarter’s profit increase breaks a streak of two consecutive quarters of year-over-year profit decreases. In the first quarter, net income fell 1.1% while the figure dropped in the fourth quarter of the last fiscal year.

The company beat estimates last quarter after being in line with expectations in the first quarter with net income of 79 cents per share.

Looking Forward: Analysts appear increasingly negative about the company’s results for the next quarter. The average estimate for the third quarter has moved down from 87 cents a share to 86 cents over the last sixty days. The average estimate for the fiscal year is $3.44 per share, down from $3.46 ninety days ago.

Competitors to Watch: Boston Scientific Corp. (NYSE:BSX), St. Jude Medical, Inc. (NYSE:STJ), Edwards Lifesciences Corp (NYSE:EW), Johnson & Johnson (NYSE:JNJ), ZOLL Medical Corporation (NASDAQ:ZOLL), Abbott Laboratories (NYSE:ABT), Stryker Corporation (NYSE:SYK), Integra LifeSciences Hldgs. Corp. (NASDAQ:IART), CONMED Corporation (NASDAQ:CNMD), and Greatbatch Inc. (NYSE:GB).

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(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)