What are Medtech CEOs Saying About the Currency Headwind?

  • Multinational companies are moving into a challenging currency environment, but some companies appear to be better positioned than others to manage the headwind. Here's a roundup of what the top medtech executives said about the foreign exchange (FX) impact during recent earnings calls.

  • During Abbott's third-quarter earnings call, CEO Miles White referred to the currency exchange headwind as the "little elephant in the room."

    "I think all of us, all investors, all companies doing business in international markets, are experiencing the upturn in exchange now, and frankly, a bit of uncertainty about how long it lasts," White said.

    At the beginning of each year, companies like Abbott have a notion of what the currency exchange is going to do, but whichever way that exchange is swinging, it never lasts the entire year, White said.

    "I think for all of us, it's a little hard to forecast," he said. "So we see that in the third quarter, we’ve seen a tick-up in currency impact. We're clearly moving into a headwind here."

    White said he expects to see a currency impact in the fourth quarter and into next year. The real question, he said, is how far into next year that headwind will last, and how heavy it will be?

    That said, there are things Abbott can do to mitigate the volatility of the currency exchange.

    "We've got a very sophisticated, and frankly, complex rolling hedging program on the currencies that we can hedge. So, we take out a lot of the unpredictability with that," White said. "Obviously, over the long-term, we're not currency traders and we're not trying to be. But we're trying to be able to make our earnings and our sales more predictable, more stable, more reliable, in terms of what our investors want to see, and frankly, impact on us, so we can plan and manage."

  • Boston Scientific reported a $31 million headwind from foreign exchange in the third quarter, which compares unfavorably to the tailwind of up to $10 million that the company had previously projected. Looking ahead, however, CFO Dan Brennan said the company expects the foreign exchange (FX) rate to have a neutral effect on earnings in 2019.

    "We've obviously kind of snapped the line with where rates are today and have a very successful hedging program that we've put in place over time," Brennan said. "And with what we see today with where rates are today, we'd kind of see FX being neutral at an EPS line as we get to 2019. Obviously, when we give guidance, we'll update that, but that's kind of where we'd be today."

  • Edwards Lifesciences CFO Scott Ullem said foreign exchange rates decreased the company's third-quarter growth by $7 million, or 0.9%, compared to the same quarter last year.

    "At current rates, we continue to expect an approximate $30 million lift, or about 1% to full-year 2018 sales compared to the prior year," Ullem said. "Compared to our July guidance, FX rates benefited earnings per share by about a $0.01 this quarter, reflecting the effective currency hedging program we have in place."

  • Johnson & Johnson CFO Joe Wolk said he thinks the volatility of emerging market currencies should be a "manageable headwind."

    "Obviously, it’s going to depend on how much currencies fluctuate. But, we’re not overly tied to currencies in emerging markets. So, it should be manageable," Wolk said during the company's third-quarter earnings call.

  • Zimmer Biomet is also bracing for the anticipated foreign exchange (FX) headwind.

    "Regarding FX, the strengthening U.S. dollar over the last several months will continue to put pressure on reported revenues and earnings," CFO Dan Florin said during the company's third-quarter earnings call. "To put this in perspective, while our organic revenue growth in the third quarter was above our expectations, the negative FX impact was about 100 basis points worse than previously expected and we expect a similar impact for the next several quarters."

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