Medtronic Likely to Meet Earnings Estimates, Driven By Robust Sales

Medical device maker Medtronic (NYSE: MDT) is scheduled to release its fourth quarter fiscal 2015 results on June 2. In the previous quarter, the company reported operational revenue growth of 7.5% year over year to about $4.32 billion. The company’s largest divisions, Cardiac Rhythm Disease Management (CRDM) and Cardiovascular, grew in double digits driven by sales growth of 17% in the Pacemaker business and about 50% in Atrial Fibrillation (AF). Other businesses, such as Neuromodulation, Surgical Technologies and Diabetes, also registered robust revenue growth. International sales accounted for 43% of total revenues for the medical device maker, driven by 11% y-o-y growth in emerging markets. ^[1] ((Press release, Medtronic, Feb 17 2015))

Medtronic’s $43 billion acquisition of Covidien was completed in January of this year. When Medtronic comes out with its Q4 FY 2015 earnings, the company expects revenue growth to be around 7% (excluding the impact of currency exchange). Going forward, the acquisition is likely to improve operational efficiency by offering various healthcare and diagnostic products and services as a package to customers.

Our price estimate for Medtronic’s stock is currently around $64, implying a discount of about 15% to the market price.

See our full analysis for Medtronic

CRDM: Robust Sales Likely To Maintain Momentum

Cardiac Rhythm Disease Management (CRDM), which consists of defibrillators and pacemakers, is Medtronic’s largest division and accounts for about 30% of total sales. In Q4 FY 2015, operational sales in the division are likely to grow by 11% year over year t0 $1.4 billion, driven by mid single digit growth in Pacemakers (reported as Low Power) and Defibrillators (reported as High Power) and over 30% growth in Atrial Fibrillation (AF). The Reveal LINQTM insertable cardiac monitor device drove growth in Pacemakers, while double-digit growth in Japan boosted sales in the ICD market.  ((Press Release, Medtronic, Dec 11 2014))

Cardiovascular: Consistent Sales Growth Expected

Cardiovascular consists of the Coronary, Structural Heart and Endovascular businesses, which offer products such as stents, heart valves and renal denervation systems for treating hypertension. The Cardiovascular division, contributing over 20% of Medtronic’s sales, grew by a modest 2% y-o-y to about $955 million in the third fiscal quarter as sales of drug eluting stents (DES) were slightly down in Q3.

The Coronary and Structural Heart business is expected to report 9% sales growth this quarter, driven primarily by double-digit growth in the structural heart business. Sales of drug eluting stents (DES), which were slightly down in Q3 in anticipation of the company’s new product, Resolute Onyx DES in Europe, picked up with the product’s recent launch. This new product drove DES sales in mid single digits this quarter. The coronary business also benefited from low-double digit growth in balloons, with the recent launch of the EuphoraTM SC balloon dilatation catheter.

Covidien Acquisition: Minimally Invasive Therapy Group

The acquisition of Covidien has led to the formation an additional business division – the Minimally Invasive Therapy Group (MITG). This includes the Surgical Solutions division and the Patient Monitoring and Recovery division. The sales generated by this division globally are estimated at $2.38 billion, a 6% year over year increase, driven by double-digit growth in Surgical Solution and Patient Recovery and Monitoring growing at low single digits.

Based on the preliminary results, the company updated its guidance for its fourth quarter adjusted cash earnings per share from $1.08 to $1.13.

View Interactive Institutional Research (Powered by Trefis):

Global Large Cap | U.S. Mid & Small Cap | European Large & Mid Cap
More Trefis Research

1. Medtronic’s CEO Discusses F3Q 2015 Results – Earnings Call Transcript, Seeking Alpha, Feb 17 2015 [↩]