Medtronic’s Earnings Preview: What To Expect
Medtronic (NYSE: MDT) will report its Q1 earnings for fiscal year 2017 on August 25th. Revenue from operations is expected to have grown by mid-single digits in Q1. Strong adoption of Micra TPS, MRI-implantable defibrillator, MiniMed and the launch of the Guardian connect system likely continued to drive growth. However, due to an extra selling week in fiscal 2016 and currency headwinds, revenue declined for Q1’17 as compared to Q1’16. The Yahoo Finance consensus estimates for revenue and EPS growth for Q1’17 are -1.4% and -1%, respectively, over the prior year quarter. Further, we expect the impact of synergies from the Covidien acquisition to have declined. Medtronic acquired Covidien in January 2015 and realized $355 million in cost synergies in fiscal 2016. The company expects this figure to drop to $225 – 250 million for fiscal 2017.
Our price estimate of $91 for Medtronic is slightly above the current market price.
See our complete analysis for Medtronic stock here
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Strong Product Adoption, Lack Of Competition Drive Growth
The company’s Cardiac Rhythm Management segment is likely to report a solid performance on account of strong adoption of the Micra Transcatheter Pacing System (TPS) and MRI-implantable defibrillator. We expect Medtronic to gain share in the defibrillator market because of delays in the launch of similar products by competitors such as Boston Scientific and St. Jude. The recent FDA approval of Edward Lifesciences’ Sapien XT and Sapien 3 transcatheter heart valves and issues related to Medtronic’s Enveo R (used to deliver Evolut R CoreValve) will only have an impact in future quarters.
Acquisitions Will Contribute Going Forward
Medtronic’s recent acquisitions of Smith & Nephew’s gynecology business and the agreement to acquire Heartware are going to boost the revenues of the Minimally Invasive Therapies Group and Vascular Group, respectively, starting in the next few quarters.
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