Will Medtronic Stock See Higher Levels Following Its Q4 Results?

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MDT: Medtronic logo
MDT
Medtronic

Medtronic (NYSE: MDT) is scheduled to report its fiscal fourth-quarter results on Thursday, May 26. We expect Medtronic to post revenues and earnings slightly above the consensus estimate. The company should benefit from a continued uptick in procedure volume. However, supply chain disruptions may impact its overall performance. Furthermore, we find Medtronic stock to be undervalued currently, 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 Q4 fiscal 2022 total revenues to be around $8.5 billion, compared to the $8.4 billion consensus estimate.
  • A recovery in procedure volume post the Omicron spread likely aided the revenue growth for the company.
  • It likely saw market share gains for its cardiovascular and neuroscience devices led by new product launches. However, diabetes products may see continued market share loss in the U.S., with pending regulatory approvals for its new products.
  • Looking at the last quarter, Medtronic’s revenue of $7.8 billion was flat y-o-y as a low single-digit growth each in Cardiovascular and Neuroscience segments was offset by a low single-digit decline in Medical Surgical segment, and a 7% fall in Diabetes segment sales.
  • Our dashboard on Medtronic Revenues provides more details.
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(2) EPS likely to be just above the consensus estimates

  • Medtronic’s Q4 fiscal 2022 earnings per share (EPS) is expected to be $1.57 per Trefis analysis, just a cent above the consensus estimate of $1.56.
  • Medtronic’s net income of $1.85 billion in Q3 reflected a 5% rise from its $1.75 billion profit in the prior-year quarter. This can primarily be attributed to over a 100 bps rise in net margins.
  • Looking at the full fiscal 2023, we expect EPS to be $6.10, compared to an estimated $5.67 in fiscal 2022.

(3) MDT stock looks undervalued

  • We estimate Medtronic’s Valuation to be $129 per share, reflecting a 24% upside from its current market price of $104.
  • This represents a forward P/EBITDA multiple of 20x based on our Medtronic’s EBITDA forecast.
  • That said, if the company reports upbeat Q4 results and FY2023 guidance better than the street estimates, it is likely that the P/EBITDA multiple will be revised upward, resulting in even higher levels for MDT stock.

While MDT stock looks undervalued, it is helpful to see how Medtronic’s Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.

Furthermore, the Covid-19 crisis has created many pricing discontinuities which can offer attractive trading opportunities. For example, you’ll be surprised how counter-intuitive the stock valuation is for Medtronic vs. TeleTech.

What if you’re looking for a more balanced portfolio instead? Our high-quality portfolio and multi-strategy portfolio have beaten the market consistently since the end of 2016.

Returns May 2022
MTD [1]
2022
YTD [1]
2017-22
Total [2]
 MDT Return 0% 1% 46%
 S&P 500 Return -4% -17% 78%
 Trefis Multi-Strategy Portfolio -5% -21% 210%

[1] Month-to-date and year-to-date as of 5/24/2022
[2] Cumulative total returns since the end of 2016

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