The winter spike in COVID-19 cases halted a rebound in elective surgeries, continuing to affect Medtronic's financial results.

Medtronic beat analysts' estimates in its third quarter, but continued to lag its 2020 results as the surge of COVID-19 cases at the end of the year reduced elective procedures again.

CEO Geoff Martha said the increased cases halted a rebound in elective surgeries after the initial crush of cases in the spring of 2020 calmed down in summer. The company had worked through a backlog of cases before the second spike.

"When [intensive care units] fill up, that's when you see a decrease in procedures," Martha told the Star Tribune in an interview.

On a call with investment analysts, he expressed hope that the worst of the second surge has passed. He predicted that the recovery of the all-important elective-surgery market would rebound faster in the U.S. than in Europe.

But in a sign that much of American business remains hostage to the coronavirus, Medtronic offered no formal future financial guidance because of the uncertainty caused by the pandemic, which has now killed more than 500,000 people in the U.S.

Martha

Medtronic's shares ended Tuesday up 2% at $118.

The company, based in Dublin, Ireland, but run out of Fridley, reported revenue of $7.8 billion. Net income of $1.8 billion, or $1.29 per share, was down 10% from the same period last year.

U.S. revenue for the world's largest medical device maker was down 2%. Revenue was flat in the company's other sectors, according to a news release.

Martha cited "sequential improvements in both revenue and earnings, despite the effect of the COVID resurgence on procedure volumes in late December and January."

He said hospitals have started to buy more capital equipment from Medtronic, most of it used in procedures. Martha said that the company was on track to "returning to growth."

Still, the company has seen a lag in average daily sales in February, continuing a trend from January, Chief Financial Officer Karen Parkhill told analysts. Prospects are better for March and April.

As Medtronic looks to return to normal levels of growth, Parkhill said the company has maintained profitability through expense control. Medtronic expects more normal bottom-line growth in the next fiscal year.

Martha and Parkhill believe decisions to keep production capacity at full strength even as sales fell will pay off when the pandemic abates.

Medtronic boasts a broad portfolio of devices. The company is working to gain market share by integrating devices to treat diabetes, a market that is expected to grow. The company also is focusing on hypertension-therapy devices designed to reduce strokes, and surgical robots for soft tissue surgery are other focuses for revenue growth.

Ironically, one of the headwinds Medtronic faces as the COVID-19 threat diminishes is a loss of ventilator sales sparked by the pandemic.

Ventilator sales do not make up a large part of Medtronic's business, but they were still triple what they were last year in the third quarter, Martha said, even as sales trended down.

Martha pointed to increases in market share in several sectors to demonstrate his confidence in the company's strategic growth potential.

The company has offered dividend increases for 43 years, Parkhill said. It's 2% return ranks in the top quintile of corporations.

And at least one silver lining has come with the pandemic. Martha said remote use of devices "is really picking up." This includes remote uses of cardiac devices and remote MRIs.

"When we couldn't meet with doctors," said Martha, "I was amazed at how digital [technology] came to the rescue."

Jim Spencer • 202-662-7432