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Medtronic profit beats estimates on new heart device demand

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(Bloomberg) — Medtronic PLC, the world’s biggest maker of heart-rhythm devices, reported first-quarter profit that topped analysts’ estimates on strong demand for its newest products to monitor the heart and repair damaged valves.

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Profit excluding one-time items was $1.02 a share for the quarter that ended July 31, the Minneapolis-based company said in a statement. That beat the $1.01 average of analysts’ estimates compiled by Bloomberg. Revenue rose to $7.27 billion, up 70 percent from a year earlier, when the company hadn’t yet merged with Covidien PLC. Analysts had estimated $7.06 billion. Sales were boosted by growing demand for the Reveal Linq monitor for heart rhythms and the CoreValve implant to replace damaged aortic valves.

The company is also broadening its efforts to provide hospital management services, with three new contracts to run operating rooms in Europe, on top of the 59 cardiac catheterization laboratories it already handles. In the United States, the number of procedures performed is on the rise thanks to a stronger economy and the Patient Protection and Affordable Care Act (PPACA), said Chief Executive Officer Omar Ishrak.

“Procedures that aren’t elective, but are necessary for clinical conditions, are being helped by increased access to care through the Affordable Care Act,” Ishrak said in a phone interview. “The economy is definitely stronger. We have also launched some good new products, and their impact is amplified in an economy that is stronger and there is a willingness for hospitals to spend.”

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Medtronic shares fell less than 1 percent to $71.10 at 10:15 a.m. in New York. They have declined less than 1 percent this year before today.

Medtronic’s largest division — the cardiac and vascular group, including defibrillators to restart a stopped heart and stents to prop open clogged arteries — posted sales of $2.57 billion, up 14 percent from a year earlier. The company is expanding in heart disease treatment, agreeing last month to acquire mitral valve device maker Twelve Inc. for $458 million.

This year’s quarter included an extra week because of the company’s fiscal calendar, also helping to boost revenue from a year earlier.

Spinal difficulties

Revenue from spinal treatments climbed 3 percent in the quarter, though the company gave up some market share to competitors.

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“The market is there and the demographic is there — we just need to perform better,” Ishrak said. “There is an extreme sense of urgency and we are very optimistic.”

Sales of diabetes devices — including insulin pumps like the MiniMed system that shuts off temporarily if blood sugar levels are too low — rose 7 percent.

Minimally invasive therapies, a division created after the $49.9 billion acquisition of Covidien, generated $2.46 billion in sales in the quarter.

The company reiterated its earnings forecast for fiscal 2016 of $4.30 to $4.40 a share, including the effect of foreign exchange rates. Analysts expected $4.37.