Medtronic, Inc. (MDT) reported second-quarter of fiscal 2010 earnings per share of 77 cents, compared to the Zacks Consensus Estimate of 74 cents and the year-ago earnings per share of 67 cents.

Sales
Total revenues in the reported quarter increased 8% year over year to $3.838 billion. Growth was witnessed across all the seven business segments. Cardiac Rhythm Disease Management (CRDM) revenues increased 3% year over year to $1.278 billion, driven by strong demand for the company’s implantable cardioverter defibrillators (ICDs). Spinal revenues increased 4% year over year to $862 million. Growth was fueled by higher demand for Kyphon and Biologics products.

CardioVascular revenues increased 17% year over year to $696 million. An increase in revenues can be attributed to strong sales growth across the company’s Coronary, Endovascular and Structural Heart Disease divisions.

Higher demand for Medtronic’s Endeavor Drug-eluting Stent in Japan also fueled growth in this segment. Neuromodulation revenues increased 12% year over year to $384 million, primarily due to higher sales of Activa PC, RC Deep Brain Stimulation systems and InterStim Therapy.

Diabetes, Surgical Technologies and Physio-Control revenues also increased 10%, 5%, and 25% year over year to $300 million, $224 million, and $94 million, respectively.

On a geographic basis, U.S. sales contributed 60% of total revenues and increased approximately 5% year over year. International sales increased 12% year over year.

Margins
Gross margin in the reported quarter increased 70 basis points (bps) year over year to roughly 76.0%. Research and development expenses as a percentage of sales increased 50 bps year over year to 9.6%. Selling, general and administrative expenses as a percentage of sales declined 90 bps year over year to 34.5%.

Balance Sheet & Cash Flow
Medtronic ended the quarter with cash, cash equivalents and short-term investments of roughly $1.542 billion, a decline of approximately 8% in the first half of the fiscal year. The company had an outstanding long-term debt of $6.368 billion at the end of the second quarter. Cash flow from operations was $781 million for the quarter.

Outlook
Medtronic raised its earnings per share guidance for fiscal 2010. For the year, earnings per share are expected in the range of $3.17 to $3.22, compared to the prior guidance of $3.10 to $3.20. The company also reiterated its constant currency revenue growth forecast in the range of 5% to 8%.

Medtronic is one of the world’s leading medical technology companies, specializing in implantable and interventional therapy devices and products. The company’s main competitors are St. Jude Medical (STJ) and Boston Scientific Corporation (BSX).

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