Medtronic’s Revenue To Top $34 Billion In Fiscal 2022?

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Medtronic’s (NYSE:MDT) revenue grew at a CAGR of 2.0% from $29.7 billion in fiscal 2016 to $30.6 billion in fiscal 2019, and it is estimated to top $34 billion in 2022, led by its Restorative Therapies Group segment. Cardiac & Vascular Group segment will account for 37% of the company’s total sales in 2020, but the company’s Restorative Therapies Group is key to the near term revenue growth, in our view. Cardiac & Vascular Group is expected to be the single-biggest revenue driver with $11.6 billion in revenues (37% of Total Revenues), which is 1.4x the size of its Restorative Therapies Group revenue in 2020. Restorative Therapies Group will be the fastest-growing segment – adding $1.2 billion over fiscal 2017-2020 (71% of the $1.7 billion in incremental revenues). Cardiac & Vascular Group will add about $1.1 billion over fiscal 2017-2020 (65% of the $1.7 billion in incremental revenue). The growth in the above two segments will be offset by a decline of around $1.2 billion (-67% of $1.7 billion in incremental revenues) in Minimally Invasive Therapies Group, due to the impact of divestitures. Look at our interactive dashboard analysis on Medtronic’s revenues for more details, parts of which are highlighted below.

Medtronic’s 4 Operating Segments

  • 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.
  • Minimally Invasive Therapies Group includes devices and therapies for neurological problems and imaging systems among other products.
  • Restorative Therapies Group primarily includes devices and implants for conditions relating to the spine, musculoskeletal system, brain, and nerves.
  • Diabetes Group includes sales of diabetes management products, which primarily consist of insulin pumps, and continuous glucose monitoring systems.

Medtronic’s Cardiac & Vascular Group Is The Largest Segment In Terms of Revenue

1. Cardiac & Vascular Group:                         $11.6 Bil (37%)
2. Minimally Invasive Therapies Group:     $8.8 Bil (28%)
3. Restorative Therapies Group:                   $8.6 Bil (27%)
4. Diabetes Group:                                           $2.5 Bil (8%)
———————————————————————-
Total Expected Revenue Fiscal 2020:          $31.4 Bil

Medtronic Added $1.7 Billion In Sales Between Fiscal 2017 And Fiscal 2020

Change in revenue from fiscal 2017 to fiscal 2020E:

Cardiac & Vascular Group:                                      $1.1 Bil
+ Minimally Invasive Therapies Group:               $(1.2) Bil
+ Restorative Therapies Group:                             $1.2 Bil
+ Diabetes Group:                                                     $0.5 Bil
—————————————————————————-
Total Revenue Change (2017-2020):                    $1.7 Bil
+ Medtronic’s Revenue In Fiscal 2017:                $29.7 Bil
= Total Expected Revenue In Fiscal 2020:         $31.4 Bil

Medtronic’s Revenue To Continue To Grow At A Steady Pace

  • Medtronic’s total revenue has grown 6% from around $28.8 billion in fiscal 2016 to $30.6 billion in fiscal 2019, and we expect revenues to grow over 11% to $34.1 billion in fiscal 2022.
  • The slower average revenue growth over the recent years can be attributed to divestitures in the company’s Minimally Invasive Therapies Group.

Comparing Medtronic’s Total Revenue Growth With That of Its Peers

  • Medtronic’s sales grew at a CAGR of 2.0% between fiscal 2016 and fiscal 2019, lower than its peers.
  • This compares with 8.6% CAGR for Boston Scientific, 15.7% for Abbott, and 18.3% for Intuitive Surgical.

Cardiac & Vascular Group To See Steady Revenue Growth

  • The Cardiac & Vascular Group’s products include pacemakers, cardiac monitors, cardiac resynchronization therapy devices (CRT-D), implantable cardioverter defibrillators (ICD), electrophysiology catheters, coronary and peripheral stents, balloons and endovascular stent graft systems, among others.
  • Cardiac & vascular group revenue grew 12% from $10.2 billion in fiscal 2016 to $11.5 billion in fiscal 2019, and it could grow 8% to $12.5 billion in fiscal 2022. The sales growth will likely be led by higher Evolut PRO valve sales, and the company’s expected launch of new devices.

Restorative Therapies Group To Grow In Mid-Single-Digits

  • The Restorative Therapies Group products are designed for the treatment of chronic pain, movement disorders, epilepsy, overactive bladder, and urinary retention, among others. The product offerings also include imaging systems and robotic guidance systems.
  • The segment revenue grew 13% from $7.2 billion in fiscal 2016 to $8.2 billion in fiscal 2019, and it could grow 14% to $9.4 billion in fiscal 2022.
  • This growth will likely be led by higher demand for its brain and specialty therapies, which have seen strong growth in the recent quarters, driven by its Intellis spinal cord stimulation platform, Solitaire X stent retriever, and StealthStation surgical navigation systems.
  • The company has lost some share in the pain stimulator market of late, and the overall pain therapies market has remained sluggish, which could impact the average segment revenue growth rate in the coming years.

Minimally Invasive Therapies Group Could See Steady Growth Going Forward

  • The Minimally Invasive Therapies Group products include surgical stapling devices, vessel sealing instruments, wound closure, electrosurgery products, hernia mechanical devices, mesh implants, and ventilators, among others.
  • Minimally invasive therapies group revenue declined 11% from $9.6 billion in fiscal 2016 to $8.5 billion in fiscal 2019, but it could grow 12% to $9.6 billion in fiscal 2022, in our view.
  • The decline earlier was due to the divestiture of the Patient Care, Deep Vein Thrombosis, and Nutritional Insufficiency businesses.
  • Looking forward, the growth will likely be led by higher demand for its patient monitoring products, along with sealing instruments, and advanced stapling products, a trend seen in the recent quarters.

Diabetes Group Sales Growth Rate Could Slow Going Forward

  • The Diabetes Group products include insulin pumps, continuous glucose monitoring (CGM) systems, and insulin pump consumables.
  • Diabetes group revenue grew 26% from $1.9 billion in fiscal 2016 to $2.4 billion in fiscal 2019, and we estimate it to grow 13% to $2.7 billion in fiscal 2022.
  • The growth going forward will likely come from the expansion of 670G, along with expected launch of 780G, which is an advanced version of its hybrid closed-loop system.
  • The slowdown in average segment revenue growth rate going forward, can be attributed to the increased competition in the U.S. for Diabetes devices, including Roche’s Accu-Chek, and Abbott’s FreeStyle Libre.

 

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