How Is Medtronic Likely To Have Fared In Q4 Fiscal 2019?

Medtronic (NYSE:MDT) is expected to publish its Q4 fiscal 2019 results on May 23. This note details Trefis’ forecasts for Medtronic, as well as some of the key trends we will be watching when the company reports earnings. You can view our interactive dashboard analysis ~ How Is Medtronic Likely To Have Fared In Q4 Fiscal 2019? for more details on the key drivers of the company’s expected performance in Q4. In addition, you can see more of our data for Health Care companies.

What are Medtronic’s key sources of revenue?

• Medtronic reports its revenues under four segments ~ Cardiac & Vascular Group, Minimally Invasive Therapies Group, Restorative Therapies Group, and Diabetes.
• Cardiac & Vascular Group includes cardiac rhythm management devices for the diagnosis, treatment, and management of heart rhythm disorders and heart failure. It also includes coronary balloons, drug-coated balloons, and thoracic stent graft systems, among others. The segment revenues of $11.53 billion in fiscal 2018 accounted for 38% of the company’s total revenues.
• Minimally Invasive Therapies Group includes devices and therapies for neurological problems and imaging systems among other products. The segment revenues of $8.54 billion in fiscal 2018 contributed 28% to the company’s top line.
• Restorative Therapies Group primarily includes devices and implants for conditions relating to the spine, musculoskeletal system, brain, and nerves. The segment generated revenues of $8.18 billion in fiscal 2018, accounting for 27% of the company’s total revenues.
• Diabetes includes sales of diabetes management products, which primarily consist of insulin pumps, and continuous glucose monitoring systems. The segment revenues of $2.42 billion in fiscal 2018 contributed 8% to the company’s total revenues.

How have Medtronic’s revenues changed over recent quarters?

• Total Revenues for Medtronic have largely trended higher over the last few quarters.
• They grew from $7.37 billion in Q3 fiscal 2018 to $7.55 billion in Q3 fiscal 2019.
• The company saw higher demand for its Minimally Invasive, and Restorative Therapies Group products in the recent quarters.
• Looking forward, Medtronic’s revenues will likely be $8.25 billion in Q4 fiscal 2019, representing 1.3% growth over the prior year quarter, and 9.3% higher than what it reported in the previous quarter.
• This can be attributed to an expected steady growth in most of the company’s segments.

How does Medtronic’s growth compare to its peers?

• Medtronic’s revenues have grown at an average of 0.8% from $7.36 billion in Q3 fiscal 2018 to $7.55 billion in Q3 fiscal 2019. This has been slower than the growth seen by its peers.
• Boston Scientific’s average revenue grew at 1.6% from $2.41 billion in the quarter ending December 2017 to $2.56 billion in the quarter ending Dec 2018.
• Intuitive Surgical’s revenues have grown at an average of 4.3% from $892 million in the quarter ending December  2017 to $1.05 billion in the quarter ending December 2018.

Which are the key revenue drivers to watch out for in Medtronic’s Q4 results?

• Cardiac & Vascular Group revenues could decline in low single-digits to $3.07 billion. While the segment should see strong growth in its drug eluting stents, a discontinued product line will likely impact the reported sales. The company is seeing strong growth for its Evolut PRO Valve, which should aid the overall segment sales.
• Minimally Invasive Therapies Group could see revenues growth of 3.5% to $2.12 billion in Q4, likely led by continued demand for its patient monitoring products, along with sealing instruments, and advanced stapling products. The segment has seen strong demand for its advanced stapling products, endoscopic ultrasound products, and Bravo reflux testing systems in the recent quarters. This trend should continue in the near term, and aid the overall segment revenue growth.
• Restorative Therapies Group could see revenue growth of 4% to $2.21 billion in Q4, led by higher demand for its brain and pain therapies, which have seen double-digit growth for the nine month period ending January, 2019. The growth in the recent quarters can be attributed to strong sales of its Intellis spinal cord stimulation platform, and StealthStation surgical navigation systems, among other products.
• Diabetes could grow in low single-digits to $651 million in Q4 fiscal 2019, benefiting from the expansion of 670G, which is the world’s first hybrid closed loop system that optimizes glycemic control for patients with type 1 diabetes, in international markets.

What will be the impact of the above on Medtronic’s EPS?

• Medtronic’s adjusted earnings per share will likely be $1.46 per share in Q4 fiscal 2019, reflecting 2.6% growth to the prior year quarter.
• Average consensus earnings estimate ~ $1.47 per share.
• This can largely be attributed to higher revenues, as well as slight improvement in margins.

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