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Medtronic (MDT) Up 3% Since Last Earnings Report: Can It Continue?
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It has been about a month since the last earnings report for Medtronic (MDT - Free Report) . Shares have added about 3% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Medtronic due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Medtronic Q3 Earnings Top Estimates, Revenues Lag
Medtronic reported third-quarter fiscal 2022 adjusted earnings per share of $1.37, which beat the Zacks Consensus Estimate by a penny. Adjusted earnings increased 6.2% from the year-ago adjusted figure. Currency-adjusted earnings per share came in at $1.34 for the quarter.
Without certain one-time adjustments — including certain restructuring and associated costs, amortization and restructuring expenses and acquisition-related gains among others — GAAP earnings per share was $1.10, reflecting a 17% rise from the year-ago reported figure.
Total Revenues
Worldwide revenues in the reported quarter grossed $7.76 billion, up 2% on an organic basis (excluding the impacts of currency) and unchanged on a reported basis year over year. The top line, however, lagged the Zacks Consensus Estimate by 1.9%.
The Q3 results, according to the company, reflect the unfavorable market impact of COVID-19 and health system labor shortages on medical device procedure volumes, primarily in the United States.
In the quarter under review, U.S. sales (51% of total revenues) were unchanged year over year on a reported basis at $3.94 billion. Non-U.S. developed market revenues totaled $2.44 billion (31% of total revenues), depicting a 3% drop on a reported basis (up 1% on an organic basis).
Emerging market revenues (18% of total revenues) amounted to $1.39 billion, up 5% on a reported basis (up 7% organically).
Segment Details
The company currently generates revenues from four major segments, namely Cardiovascular Portfolio, Medical Surgical Portfolio, Neuroscience Portfolio, and Diabetes.
In the fiscal third quarter, Cardiovascular revenues rose 3% at CER to $2.75 billion, reflecting mid-single-digit organic growth in Cardiac Rhythm & Heart Failure (CRHF) and Structural Heart & Aortic (SHA) and low single-digit organic growth in Coronary & Peripheral Vascular (CPV). CRHF sales totaled $1.40 billion, up 4% year over year at CER. Revenues from SHA were up 4% at CER to $740 million. CPV revenues were up 1% at CER to $603 million.
In Medical Surgical, worldwide sales totaled $2.29 billion, up 1% year over year at CER. The quarter registered high single-digit organic growth in Surgical Innovations (SI) offset by low double-digit organic declines in Respiratory, Gastrointestinal & Renal (RGR). Excluding the impact of tough year-over-year ventilator sales comparable, Medical Surgical revenues increased 6% organically.
In Neuroscience, worldwide revenues of $2.14 billion were up 2% year over year at CER, driven by low-single-digit growth in Cranial & Spinal Technologies (CST) and Specialty Therapies, partially offset by low single-digit declines in Neuromodulation, all on an organic basis.
Revenues at the Diabetes group rose 5% at CER to $584 millionas a high-teens decline in the United States was partially offset by mid-single-digit growth in international markets. The company reported international growth on low-double-digit growth in sales of continuous glucose monitoring (CGM) products, mid-single-digit growth in consumable sales, and flat year-over-year sales of durable insulin pumps.
Margins
Gross margin in the reported quarter expanded 203 basis points (bps) to 68.3% on a 2.9% rise in gross profit to $5.30 billion. Adjusted operating margin expanded 80 bps year over year to 26.7%. Selling, general and administrative expenses rose 0.9% to $2.56 billion. Research and development expenses increased 11.1% to $668 million.
Guidance
Medtronic provided its fourth-quarter fiscal 2022 financial guidance.
The company expects fiscal fourth-quarter organic revenue growth of approximately 5.5%. According to the company, this is in line with current fourth-quarter organic revenue growth as per Street consensus. If the recent foreign currency exchange rates hold, fourth-quarter revenues would be negatively impacted by approximately $185 million.
The current Zacks Consensus Estimate for fiscal Q4 is pegged at $8.55 billion per share indicating 4.37% year-over-year growth on a reported basis.
The company expects fourth-quarter adjusted earnings per share in the range of $1.56 to $1.58, which includes a neutral to slightly positive impact of foreign currency based on the recent rates. The Zacks Consensus Estimate is pegged at $1.57 share.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
VGM Scores
Currently, Medtronic has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions has been net zero. Notably, Medtronic has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Medtronic (MDT) Up 3% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Medtronic (MDT - Free Report) . Shares have added about 3% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Medtronic due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Medtronic Q3 Earnings Top Estimates, Revenues Lag
Medtronic reported third-quarter fiscal 2022 adjusted earnings per share of $1.37, which beat the Zacks Consensus Estimate by a penny. Adjusted earnings increased 6.2% from the year-ago adjusted figure. Currency-adjusted earnings per share came in at $1.34 for the quarter.
Without certain one-time adjustments — including certain restructuring and associated costs, amortization and restructuring expenses and acquisition-related gains among others — GAAP earnings per share was $1.10, reflecting a 17% rise from the year-ago reported figure.
Total Revenues
Worldwide revenues in the reported quarter grossed $7.76 billion, up 2% on an organic basis (excluding the impacts of currency) and unchanged on a reported basis year over year. The top line, however, lagged the Zacks Consensus Estimate by 1.9%.
The Q3 results, according to the company, reflect the unfavorable market impact of COVID-19 and health system labor shortages on medical device procedure volumes, primarily in the United States.
In the quarter under review, U.S. sales (51% of total revenues) were unchanged year over year on a reported basis at $3.94 billion. Non-U.S. developed market revenues totaled $2.44 billion (31% of total revenues), depicting a 3% drop on a reported basis (up 1% on an organic basis).
Emerging market revenues (18% of total revenues) amounted to $1.39 billion, up 5% on a reported basis (up 7% organically).
Segment Details
The company currently generates revenues from four major segments, namely Cardiovascular Portfolio, Medical Surgical Portfolio, Neuroscience Portfolio, and Diabetes.
In the fiscal third quarter, Cardiovascular revenues rose 3% at CER to $2.75 billion, reflecting mid-single-digit organic growth in Cardiac Rhythm & Heart Failure (CRHF) and Structural Heart & Aortic (SHA) and low single-digit organic growth in Coronary & Peripheral Vascular (CPV). CRHF sales totaled $1.40 billion, up 4% year over year at CER. Revenues from SHA were up 4% at CER to $740 million. CPV revenues were up 1% at CER to $603 million.
In Medical Surgical, worldwide sales totaled $2.29 billion, up 1% year over year at CER. The quarter registered high single-digit organic growth in Surgical Innovations (SI) offset by low double-digit organic declines in Respiratory, Gastrointestinal & Renal (RGR). Excluding the impact of tough year-over-year ventilator sales comparable, Medical Surgical revenues increased 6% organically.
In Neuroscience, worldwide revenues of $2.14 billion were up 2% year over year at CER, driven by low-single-digit growth in Cranial & Spinal Technologies (CST) and Specialty Therapies, partially offset by low single-digit declines in Neuromodulation, all on an organic basis.
Revenues at the Diabetes group rose 5% at CER to $584 millionas a high-teens decline in the United States was partially offset by mid-single-digit growth in international markets. The company reported international growth on low-double-digit growth in sales of continuous glucose monitoring (CGM) products, mid-single-digit growth in consumable sales, and flat year-over-year sales of durable insulin pumps.
Margins
Gross margin in the reported quarter expanded 203 basis points (bps) to 68.3% on a 2.9% rise in gross profit to $5.30 billion. Adjusted operating margin expanded 80 bps year over year to 26.7%. Selling, general and administrative expenses rose 0.9% to $2.56 billion. Research and development expenses increased 11.1% to $668 million.
Guidance
Medtronic provided its fourth-quarter fiscal 2022 financial guidance.
The company expects fiscal fourth-quarter organic revenue growth of approximately 5.5%. According to the company, this is in line with current fourth-quarter organic revenue growth as per Street consensus. If the recent foreign currency exchange rates hold, fourth-quarter revenues would be negatively impacted by approximately $185 million.
The current Zacks Consensus Estimate for fiscal Q4 is pegged at $8.55 billion per share indicating 4.37% year-over-year growth on a reported basis.
The company expects fourth-quarter adjusted earnings per share in the range of $1.56 to $1.58, which includes a neutral to slightly positive impact of foreign currency based on the recent rates. The Zacks Consensus Estimate is pegged at $1.57 share.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
VGM Scores
Currently, Medtronic has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions has been net zero. Notably, Medtronic has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.