What To Expect From Medtronic’s Q4?

May 24th, 2021 by Trefis Team
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Medtronic stock (NYSE: MDT) is scheduled to report its fiscal fourth-quarter results on Thursday, May 27. We expect Medtronic to likely post revenues and earnings below the consensus estimates. While the company is likely to benefit from an improved demand for medical devices with a rebound in the volume of elective surgeries, a resurgence in Covid-19 cases may impact the company’s overall revenue growth.

Our forecast indicates that Medtronic’s valuation is around $133 per share, which is only 5% above the current market price of around $127. Look at our interactive dashboard analysis on Medtronic Pre-Earnings: What To Expect in Q4? for more details.

(1) Revenues expected to be slightly below the consensus estimate

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Trefis estimates Medtronic’s Q4 fiscal 2021 total revenues to be around $8.10 billion, just a tad below $8.14 billion consensus estimates. While medical devices sales were heavily impacted due to the Covid pandemic, the improved demand with resumption of elective surgeries likely helped the company navigate well during the quarter. While Diabetes, Minimally Invasive Therapies Group, and Restorative Therapies Group segments combined have seen a rise of 3.5% y-o-y to $5.1 billion in Q3, this growth was largely offset by a 4.0% decline seen in Cardiac & Vascular Group, due to resurgence of Covid-19 cases, .impacting the overall elective surgeries volume. Our dashboard on Medtronic’s Revenues provides more details on segment-wise revenue breakup.

2) EPS likely to be below the consensus estimates

Medtronic’s Q4 2021 earnings per share (EPS) is expected to be $1.37 per Trefis analysis, 3.5% below the consensus estimate of $1.42. Medtronic’s Non-GAAP net income of $1.8 billion in Q3, reflected a 10% drop from its $1.9 billion profit in the prior year quarter, primarily due to a 270 bps contraction in the net margins, owing to the increased costs during the pandemic. Looking at the full fiscal 2021, we expect a 6% y-o-y decline in EPS to $4.30, due to margin contraction.

(3) Stock price estimate slightly above the current market price

Going by our Medtronic Valuation, with an EPS estimate of around $4.30 and P/E multiple of 31x in fiscal 2021, this translates into a price of $133, which is 5% above the current market price of around $127. Although the coronavirus outbreak has had a sizable impact on Medtronic’s business over the past few quarters, due to deferment of elective surgeries, we believe the demand for medical devices will rebound as the spread of the virus subsides, especially with large scale vaccination programs underway in several countries.

Note: P/E Multiples are based on Share Price at the end of the year, and reported (or expected) Adjusted Earnings for the full year

While MDT stock looks fully valued, 2020 has created many pricing discontinuities which can offer attractive trading opportunities. For example, you’ll be surprised how the stock valuation for United Therapeutics vs. eBay shows a disconnect with their relative operational growth. You can find many such discontinuous pairs here.

See all Trefis Price Estimates and Download Trefis Data here

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