Medtronic Chairman and CEO Omar Ishrak and Executive Vice President and CFO Karen Parkhill participated in a Q&A at the 37th Annual J.P. Morgan Healthcare Conference in San Francisco, Jan. 7 to 10.
Prior to the Q&A, Mr. Ishrak gave a presentation on the state of the company. Highlights from the report include:
• Medtronic currently has more than 86,000 employees including 11,200 clinical professionals, scientists and engineers.
• The company has made a $2.3 billion investment in research and development.
• Medtronic has 46,000-plus patents in its portfolio.
• For the 2018 fiscal year, Medtronic reported $30 billion revenue.
"It's been a really great year of execution," said Mr. Ishrak during the Q&A. "First of all, we doubled our company in the past five years, doubled the number of employees, which we worked through since the beginning of last year that has stabilized."
For the 2019 fiscal year, Medtronic estimates organic revenue growth will hit 5 percent to 5.5 percent, and the operating margin improvement will be +50 bps. Free cash flow for the fiscal year is expected to hit $4.7 billion to $5.1 billion. In the coming year, Medtronic aims to release several products including the Mazor X Stealth Edition, which is expected to accelerate the company's spine and enabling technologies growth.
"We have several products that just launched and groups that are doing well like RTG," said Mr. Ishrak. "We've had ups and downs in other areas, but we think diversification will give us the ability to sustain market expansion."
However, the uncertainty around proposed tax regulations made it difficult to give a clear picture of what financial results will look like over the next two to three years. The company set a goal of growing 8 percent per year, but the 2020 fiscal year could hit below that due to a one-time step up in the company's tax rate.
After the Q&A, a Barclays analyst cut her price target for the company's shares from $113 to $104 and reiterated an overweight rating, citing the company's record of providing guidance as "spotty." Mr. Ishrak did not agree with this assessment and touted the company's pipeline of innovation the next day during an interview with Jim Cramer. The innovation includes Mazor X.
"[Mazor X is] at its formative stages. It's just starting," said Mr. Ishrak. "What Medtronic can do is take a product like that and company like that and scale it at a speed that that company alone cannot reach. It's more restricted to spinal procedures, but spinal procedures are one of the biggest healthcare challenges and in planning those procedures and the implementation of those procedures and the guidance of the implants, this is an invaluable product and that's what we will drive."