What To Expect From Medtronic’s Q1?

MDT: Medtronic logo

Medtronic (NYSE: MDT) is scheduled to report its fiscal 2023 first-quarter results on Tuesday, August 23. We expect Medtronic to post revenues and earnings above the street estimates, aided by its newly launched cardiovascular products. However, high inflation, the Covid-19-induced lockdowns in China, and supply chain disruptions likely weighed on the company’s overall performance. Looking at MDT stock, we believe that it has more room for growth, as discussed below. Our interactive dashboard analysis of Medtronic’s Earnings Preview has additional details.

(1) Revenues are expected to be higher than the consensus estimate

  • Trefis estimates Medtronic’s Q1 fiscal 2023 total revenues to be around $7.3 billion, slightly higher than the $7.2 billion consensus estimate.
  • The company launched the Micra AV pacemaker in Japan in November 2021 and secured regulatory approval in China in May 2022. It also launched Abre venous self-expanding stent system for Deep Venous disease. These new products should aid its Cardiovascular sales growth.
  • Medical Surgical segment may see lower sales due to a continued decline in ventilator demand.
  • Looking at the last quarter, Medtronic’s revenue declined 1% y-o-y to $8.1 billion, as a 2% rise in Cardiovascular sales was more than offset by a 5% decline in Medical Surgical and an 8% fall in Diabetes sales.
  • Our dashboard on Medtronic Revenues provides more details on the company’s segments.
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(2) EPS likely to be above the consensus estimates

  • Medtronic’s Q1 fiscal 2023 earnings per share (EPS) is expected to be $1.15 per Trefis analysis, above the consensus estimate of $1.12.
  • Medtronic’s net income of $2.0 billion in Q4 reflected a 0.4% rise y-o-y, as the company’s adjusted operating margins improved 40 bps to 28.8%.
  • Looking at the full fiscal 2023, we expect EPS to be higher at $5.58, compared to the $5.55 seen in fiscal 2022.

(3) MDT stock has more room for growth

  • We estimate Medtronic’s Valuation to be $114 per share, reflecting a 20% upside from its current market price of $95.
  • This represents a forward P/EBITDA multiple of 16x based on our Medtronic’s EBITDA forecast.
  • That said, if the company reports upbeat Q1 results and full fiscal guidance better than the street estimates, it is likely that the P/EBITDA multiple will be revised upward, resulting in higher levels for MDT stock.

While MDT stock may see higher levels, 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 Becton Dickinson vs. Amerco.

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 Aug 2022
MTD [1]
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Total [2]
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[1] Month-to-date and year-to-date as of 8/19/2022
[2] Cumulative total returns since the end of 2016

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