Medical devices firm Medtronic expects inflation to weigh on earnings next fiscal

While inflation in many countries has eased in recent months, the management expects a delayed improvement in its earnings as its costs remain high.

The company also expects 80% of its portfolio to come under the Chinese government's volume-based procurement (VBP) by the end of fiscal 2024, under which the country will buy medical devices in bulk at a sharp discount.

About half of its portfolio has already been impacted by bulk buying at sharp discounts in China, executives said on an investor conference call.

"VBP has affected us more than many of our competitors, given the size and breadth of our business in China. However, we do expect that we are now through the majority of the impact," Chief Financial Officer Karen Parkhill said.

Stifel analyst Rick Wise expects Medtronic to get past pricing pressure in China in "the not too distant future".

Shares of the company were up 1% in choppy trade after growth in cardiovascular, neuroscience and diabetes devices helped soften a blow to sales in China in the third quarter from a resurgence in COVID-19 cases.

A surge in cases in China had also hit rivals such as Abbott Laboratories and Johnson & Johnson.

Excluding items, the Dublin-based company reported a profit of $1.30 per share, above the average analyst estimate of $1.27 per share, according to Refinitiv data.

Following the beat, the company, whose financial year ends in April, also raised the low end of its 2023 profit outlook to $5.28 per share, from $5.25 it forecast in November. The top end of its forecast remains at $5.30.