Medtronic's diabetes device sales drive profit beat but surgical unit lags

(Reuters) -Medtronic beat Wall Street estimates for third-quarter profit on Tuesday, partly helped by demand for its diabetes devices, but shares fell nearly 5% in premarket trading as it saw softer sales in its medical surgical unit.

A change in buying patterns by its distributors in the U.S. hurt the company's medical surgical unit, along with ongoing competitive pressures in the surgical staplers market.

Medtronic expects the issues with distributors to resolve starting fiscal year 2026, CEO Geoff Martha said on a call with analysts.

The segment, which makes surgical devices including robot-assisted ones, saw sales decline 1.9% to $2.07 billion, missing estimates of $2.13 billion.

Sales of its Nellcor blood oxygen management devices were also pressured by a decline in hospitalizations for respiratory illnesses in the U.S. in the quarter versus a year ago.

On the other hand, quarterly sales at its diabetes segment grew 8.4% to $694 million, above estimates of $681.8 million, helped by adoption of the company's insulin delivery systems.

Companies such as Medtronic, Abbott and Dexcom have seen resilient demand for their continuous glucose monitors used by patients with diabetes, aided by diabetes care awareness, wider insurance coverage, and preference for devices that do not need finger pricks.

Sales in Medtronic's cardiovascular segment rose 3.7% to $3.04 billion, while its neuroscience segment rose 4.4% to $2.46 billion.

The medical device maker reported third-quarter adjusted profit per share of $1.39, compared to analysts' estimate of a profit of $1.36 per share.

The beat was aided by better-than-expected performance on margins and a lower tax rate, said RBC Capital Markets analyst Shagun Singh.

The company also kept its annual profit forecast unchanged in the range of $5.44 to $5.50 per share. Analysts, on average, estimate the company's annual profit at $5.45, according to data compiled by LSEG.

(Reporting by Puyaan Singh and Sriparna Roy in Bengaluru; Editing by Pooja Desai and Leroy Leo)