[Updated: Feb 17, 2022] Medtronic Q3FY22 Earnings Preview
Medtronic stock (NYSE: MDT) is scheduled to report its fiscal third-quarter results on Tuesday, Feb 22. We expect Medtronic to post revenues and earnings above the consensus estimates. The company is likely to benefit from improved demand for medical devices with a rebound in the volume of elective surgeries. However, the wide spread of Omicron, and its impact on overall healthcare services in some geographies, is likely to impact the company’s overall performance in Q3. Furthermore, Trefis’ forecast indicates that Medtronic stock is currently undervalued, as discussed below. Our interactive dashboard analysis of Medtronic’s Earnings Preview has additional details.
(1) Revenues expected to be above the consensus estimate
- Trefis estimates Medtronic’s Q3 fiscal 2022 total revenues to be around $8.0 billion, slightly above the $7.9 billion consensus estimate.
- While medical devices sales were heavily impacted due to the Covid pandemic, the improved demand, with a rebound in the volume of procedures, likely helped the company navigate well during the quarter.
- That said, the Omicron spread is likely to impact the top-line growth due to postponement of elective surgeries in some geographies.
- In Q2 fiscal 2022, the company reported a 3% y-o-y revenue growth, led by a low single-digit growth across the four segments – Cardiovascular, Medical-Surgical, Neuroscience, and Diabetes.
- Our dashboard on Medtronic’s Revenues provides more details on segment-wise revenue breakup.
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(2) EPS is expected to be above the consensus estimates
- Medtronic’s Q3 fiscal 2022 adjusted earnings per share (EPS) is expected to be $1.40 per Trefis analysis, marginally above the $1.37 figure per the consensus estimate.
- Medtronic’s Non-GAAP net income of $1.8 billion in Q2 fiscal 2022 reflected a good 30% growth from its $1.4 billion profit in the prior-year quarter, primarily due to increase in revenues as well as net margins expanding 480 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) MDT Stocks Looks Undervalued
- We estimate Medtronic’s Valuation to be $144, reflecting a significant 40% upside potential from its current levels of $103.
- This represents a P/EBITDA of 41x based on Medtronic’s EBITDA for the last twelve months.
- The 41x P/EBITDA compares with an average of around 33x between 2018 and 2021, and levels of around 30x MDT stock is trading at currently.
- If the company reports upbeat results, as we anticipate, and provided an optimistic outlook for full fiscal 2022, MDT stock will likely see higher levels, resulting in a higher P/EBITDA multiple compared to 30x currently.
Below you’ll find our previous coverage of MDT stock, where you can track our view over time.
[Updated: Jan 6, 2022] Medtronic Stock Update
The stock price of Medtronic has seen a fall of 4% over the last month, underperforming the broader indices, with the S&P 500 rising 2% over the same period. This underperformance can largely be attributed to the U.S. FDA’s warning letter to Medtronic for its Northridge facility in California citing inadequacy of medical devices quality system requirements.  The agency is not pleased with how Medtronic handled its faulty MiniMed 600 insulin pumps, which were recalled in 2019, after more than thousands of complaints were reported over the span of three years. MDT stock fell over 6% in a single trading session on Dec 15, when the company made the FDA’s letter public. The reason for the fall was mounting concerns over the approval of Medtronic’s most advanced insulin pump system – MiniMed 780G, which is already available in 38 countries and under review by the U.S. FDA. If approved, it will likely result in a strong growth for the company’s diabetes business, which garnered $2.4 billion in sales last fiscal year, reflecting 8% of the company’s total sales.
MDT stock has also been weighed down due to multiple downgrades from the Wall Street analysts over the last month or so. However, we find MDT stock to be attractively valued at its current levels. Going by our Medtronic Valuation of $144 per share, based on $5.71 expected adjusted EPS and a 25x P/E multiple for fiscal 2022, there is around 36% upside from its current levels of $106, implying that MDT stock is currently undervalued and it will likely see higher levels going forward, in our view. Even if were to look at the average price estimate of $132 per the analysts forecasts, it reflects a large 25% upside for MDT stock.
Looking at the near term, it appears that MDT stock is likely to see higher levels. Going by historical performance, there is a higher chance of a rise in MDT stock over the next month. Out of 333 instances in the last ten years that MDT stock saw a twenty-one day fall of 4% or more, 192 of them resulted in MDT stock rising over the subsequent one month period (twenty-one trading days). This historical pattern reflects 192 out of 333, or about 58% chance of a rise in MDT stock over the coming month, implying that MDT stock may see higher levels in the near term. See our analysis on Medtronic Stock Chance of A Rise for more details.
While MDT stock may see higher levels going forward, it is helpful to see how its peers stack up. Check out Medtronic Stock Comparison With Peers to see how MDT stock compares against peers on metrics that matter. You can find more such useful comparisons on Peer Comparisons.
Calculation of ‘Event Probability‘ and ‘Chance of Rise‘ using last ten years data
- After moving 2.0% or more over a five-day period, the stock rose in the next five days on 50% of the occasions.
- After moving 4.3% or more over a ten-day period, the stock rose in the next ten days on 58% of the occasions
- After moving -3.8% or more over a twenty-one-day period, the stock rose in the next twenty-one days on 58% of the occasions.
This pattern suggests that there are higher chances of a rise in MDT stock over the next ten days and one month, while there is an equal chance of a rise or a fall over the next five days.
Medtronic (MDT) Stock Return (Recent) Comparison With Peers
- Five-Day Return: MDT highest at 2.0%; ISRG lowest at -6.4%
- Ten-Day Return: BAX highest at 4.8%; ISRG lowest at -1.8%
- Twenty-One Days Return: BAX highest at 10.9%; MDT lowest at -3.8%
[Updated: Nov 26, 2021] Medtronic Earnings Update
Medtronic (NYSE:MDT) recently reported its Q2 FY22 results, which were mixed with revenue slightly below, and earnings above our estimates. The company reported sales of around $7.8 billion (up 3% y-o-y), compared to our estimate of $8.0 billion. While cardiovascular and neuroscience segments revenue grew over 3% each, medical surgical segment sales were up under 1%. The company’s management stated that the impact of Covid-19 was greater than earlier anticipated. Our dashboard on Medtronic’s Revenues offers more details on the company’s segments.
Looking at the bottom-line, the company reported adjusted earnings of $1.32 per share, compared to $1.02 in the prior year quarter. The earnings were slightly above our forecast of $1.30 per share and the $1.29 per share consensus estimate. The company saw 470 bps operating margin expansion, bolstering the overall earnings growth.
Following a mixed performance in Q2FY22, Medtronic lowered its full-fiscal outlook, with revenue now estimated to grow between 7% and 8%, compared to its prior guidance of 9% growth. However, the company affirmed its earnings outlook of $5.65 to $5.75.
We have also updated our model following the Q2 release. We are maintaining our sales forecast to be around $33 billion in fiscal 2022, with Medtronic to see a strong uptake in 780G insulin pumps and its continuous glucose monitoring system – Guardian 4 (currently awaiting regulatory approvals). We also expect EPS to be at $5.71, compared to $4.43 in fiscal 2021, and near to the mid-point of the company’s provided range. Given these changes to our forecasts, we have revised our Medtronic Valuation to $144 per share, based on $5.71 expected adjusted EPS and a 25x P/E multiple for fiscal 2022, reflecting a 26% upside from its current levels of $114, implying that MDT stock is currently undervalued and it will likely see higher levels in the near term, in our view.
[Updated: Nov 19, 2021] Medtronic Q2 FY22 Earnings Preview
Medtronic stock (NYSE: MDT) is scheduled to report its fiscal second-quarter results on Tuesday, Nov 23. 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. However, the rise of the delta variant, and its impact on overall healthcare services in some geographies, may impact the overall earnings growth.
Medtronic in its Q1 earnings conference call stated that it is seeing a slowdown in total volume of procedures entering into Q2. That said, we expect the company to navigate well over the latest quarter led by economic recovery and rising demand for medical devices. Furthermore, Trefis’ forecast indicates that Medtronic’s valuation is $149 per share, which is 27% higher than the current market price of around $118, implying that the stock is undervalued, in our view. Our interactive dashboard analysis on Medtronic’s Pre-Earnings has additional details.
(1) Revenues expected to be in-line with the consensus estimate
Trefis estimates Medtronic’s Q2 fiscal 2022 total revenues to be around $8.0 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 Q1 fiscal 2022, the company reported a solid 23% y-o-y growth in revenue, led by a 29% growth in neuroscience as well as in medical surgical business, while cardiovascular segment sales were up 19%, and this trend could continue, albeit revenues growing at a slower pace given the impact of the delta variant on overall procedures volume. Our dashboard on Medtronic’s Revenues provides more details on segment-wise revenue breakup.
2) EPS likely to be in-line with the consensus estimates
Medtronic’s Q2 fiscal 2022 earnings per share (EPS) is expected to be $1.30 per Trefis analysis, in-line with the consensus estimate of $1.29. Medtronic’s Non-GAAP net income of $1.9 billion in Q1 fiscal 2022, reflected a sharp 2.3x growth from its $836 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 30% y-o-y growth in EPS to $5.75, compared to $4.43 in fiscal 2021.
(3) Stock price estimate 27% above the current market price
Going by our Medtronic Valuation, with an EPS estimate of around $5.75 and P/E multiple of 26x in fiscal 2022, this translates into a price of $149, which is 27% above the current market price of around $118. In fact, at its current levels of $118, MDT stock is trading at 20x its forward full-year earnings, and this compares with levels of nearly 30x seen as recently as late 2020, implying that the stock has more room for growth.
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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|S&P 500 Return||-1%||-6%||100%|
|Trefis MS Portfolio Return||2%||-8%||264%|
 Month-to-date and year-to-date as of 2/17/2022
 Cumulative total returns since the end of 2016