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Covid-19 has been a mixed blessing for makers of medical equipment

27 Aug 2020

FEW INDUSTRIES have whipsawed in the covid-19 recession as violently as medical-device makers. The pandemic led to a collapse in elective medical procedures requiring their sophisticated kit, dealing a powerful blow to sales. At the same time, the crisis created opportunities for firms making ventilators and testing kit.

For an illustration of how this dynamic has played out, consider Medtronic. On August 25th the American giant, with a market capitalisation of $138bn, reported its financial results for the three months to July. On the face of it, its performance was abysmal. Revenues fell by 17% compared with the same quarter a year ago, to $6.5bn. Net income plunged by nearly half. Citing the pandemic, the firm refused to provide earnings guidance.

And yet investors and analysts cheered. One reason is that they had feared worse: Medtronic handily beat forecasts for both revenues and earnings. Another is that sales of ventilators shot up five-fold, cushioning overall revenues. Geoff Martha, the firm’s boss, now expects a return to “normal growth” within a few quarters.

The revival at Medtronic might augur a broader return to form for medical-device firms. Matt Miksic of Credit Suisse, an investment bank, notes that these companies came into the crisis “with the wind at their backs”. They were propelled by strong...

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This content was originally published by The Economist: Business. Original publishers retain all rights. It appears here for a limited time before automated archiving. By The Economist: Business

Covid-19 – Johns Hopkins University

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