What To Expect From Medtronic’s Q1?

Medtronic stock (NYSE: MDT) is scheduled to report its fiscal first-quarter results on Tuesday, Aug 24. We expect Medtronic to likely post revenues and earnings largely in-line with the consensus estimates. The company is likely to benefit from an improved demand for medical devices with a rebound in the volume of elective surgeries, a trend seen with other medical device companies as well. Furthermore, our forecast indicates that Medtronic’s valuation is around $148 per share, which is 15% above the current market price of around $129, implying that MDT stock has more room for growth from its current levels. Our interactive dashboard analysis on Medtronic Pre-Earnings: What To Expect in Q1? has more details.

(1) Revenues expected to be in-line with the consensus estimate

Trefis estimates Medtronic’s Q1 fiscal 2022 total revenues to be around $7.9 billion, in-line with the consensus estimates. While medical devices sales were heavily impacted due to the Covid pandemic, the improved demand with a rebound in volume of procedures likely helped the company navigate well during the quarter. In Q4 fiscal 2021, the company reported a solid 36% y-o-y growth in revenue, led by a strong 64% surge in neuroscience and a 54% jump in cardiovascular segment sales. Our dashboard on Medtronic’s Revenues provides more details on segment-wise revenue breakup.

2) EPS likely to be slightly above the consensus estimates

Medtronic’s Q1 fiscal 2022 earnings per share (EPS) is expected to be $1.35 per Trefis analysis, slightly above the consensus estimate of $1.32. Medtronic’s Non-GAAP net income of $2.0 billion in Q4 fiscal 2021, reflected a sharp 2.6x growth from its $777 million profit in the prior year quarter, primarily due to growth in revenues as well as net margins expanding over 1000 bps, with operating expenses growing at a slower pace compared to the revenues. Looking at the full fiscal 2022, we expect a 29% y-o-y growth in EPS to $5.71, compared to $4.43 in fiscal 2021.

(3) Stock price estimate 15% above the current market price

Going by our Medtronic Valuation, with an EPS estimate of around $5.71 and P/E multiple of 26x in fiscal 2022, this translates into a price of $148, which is 15% above the current market price of around $129. At its current levels of $129, MDT stock is trading at 23x its forward full-year earnings, and this compares with levels of nearly 30x seen as recently as late 2020.

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

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