* Q3 EPS ex-items 77 cents/shr vs 76 cents Wall St view
* Q3 revenue $3.85 billion is shy of $3.87 bln estimate
* Boosts low end of its fiscal 2010 outlook
* Shares down 1.5 percent on NYSE (Recasts; Adds earnings details, analyst comment, byline)
By Susan Kelly
CHICAGO, Feb 23 (Reuters) - Medtronic Inc MDT.N on Tuesday posted a 19 percent rise in quarterly profit on lower operating expenses, but soft sales of its spinal products and pacemakers disappointed investors, and its shares slumped.
Overall revenue rose 6 percent, after adjusting for a foreign currency benefit, within the company's forecast range but not as strong as some had hoped, based on its recent string of strong quarters, analysts said.
"On the revenue line, there is very little to be excited about," Tim Nelson, a healthcare analyst with First American Funds said, noting Medtronic had forecast revenue growth of 5 percent to 8 percent.
Revenue, including a boost from positive foreign currency translations in the quarter, rose 10 percent, as growth in implantable heart defibrillators, stents, blood glucose monitors and neuromodulation devices helped offset the weakness in spine and pacemakers.
"Spine continues to be impacted by competition, and the numbers came in a little light there. In general, it looks like the other segments made up for that," Edward Jones analyst Aaron Vaughn said.
Medtronic reported net earnings in the fiscal third-quarter that ended Jan. 29, of $831 million, or 75 cents a share, up from $698 million, or 62 cents a share, a year ago.
Excluding special items, the Minneapolis-based company earned 77 cents a share, topping the average analyst estimate by a penny, according to Thomson Reuters I/B/E/S.
For a graphic, click link.reuters.com/pux42j
Medtronic has restructured operations and reallocated resources into higher-growth businesses as the economic downturn led to rising unemployment, a slowdown in medical procedures and pressure on pricing.
"Q3 was another step in building our track record of consistent performance," Medtronic Chief Executive Bill Hawkins told analysts on a conference call.
Third-quarter revenue rose 10 percent to $3.85 billion, shy of the analysts' average forecast of $3.87 billion. Revenue rose 6 percent when adjusted for a favorable $144 million foreign exchange impact.
Hawkins said he was pleased with a growth rate he said was at the very high end of what was seen across the medical technology industry in the past quarter, but acknowledged the company was still working to address issues in its spine division. Medtronic has also struggled to integrate the Kyphon spine products business it acquired more than two years ago.
"We've been telling people for some time that we have our spine business in the repair shop," Hawkins said in an interview. "We've taken a step back and are refreshing the product pipeline."
In the company's business segments, revenue rose 6 percent to $1.24 billion in cardiac rhythm disease management, which includes both pacemakers and implantable cardioverter defibrillators, or ICDs, and is the company's largest division. ICD revenue rose 9 percent, while pacemaker sales were flat.
Spine division revenue grew 1 percent to $842 million, while revenue from stents and other cardiovascular devices rose 28 percent to $722 million; neuromodulation devices rose 11 percent to $394 million; and diabetes products increased 12 percent to $311 million.
Medtronic raised the low end of its fiscal 2010 per-share earnings forecast and expects profit to be in a range of $3.20 to $3.22, up from its previous outlook of $3.17 to $3.22. It still expects sales growth of 5 percent to 8 percent on a constant-currency basis in the fourth quarter.
Medtronic shares fell 66 cents, or about 1.5 percent, to $43.00 in late-morning trading on the New York Stock Exchange, off an earlier low of $42.57. (Reporting by Susan Kelly; Editing by Dave Zimmerman and Maureen Bavdek)