We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Medtronic (MDT) Q1 Earnings Beat Estimates, Margins Down
Read MoreHide Full Article
Medtronic plc (MDT - Free Report) reported adjusted earnings per share (EPS) of $1.13 in first-quarter fiscal 2023, beating the Zacks Consensus Estimate by 0.9%. However, adjusted earnings plunged 19.9% from the year-ago figure of $1.41 per share. Currency-adjusted EPS came in at $1.16 for the quarter.
Our model too projected an adjusted EPS of $1.13 in Q1.
Without certain one-time adjustments — including restructuring and associated costs, amortization and restructuring expenses, acquisition-related costs and certain medical device regulation charges, among others— GAAP EPS was 70 cents, reflecting a 25% surge from the year-ago reported figure.
Total Revenues
Worldwide revenues in the reported quarter grossed $7.37 billion, down 4% on an organic basis (excluding the impacts of currency) and 7.7% on a reported basis. Meanwhile, the top line exceeded the Zacks Consensus Estimate by 2.3%.
The fiscal first-quarter revenues compares to our own estimate of $7.25 billion.
The Q1 organic revenues, according to the company, reflect the unfavorable market impact of supply chain shortages, coupled with a strong comparison with high ventilator sales and a rebound in market procedures post the third COVID-19 wave in the year-ago period.
Q1 in Details
In the quarter under review, U.S. sales (51% of total revenues) declined 8% on a reported basis (down 9% on an organic basis) to $3.77 billion. Non-U.S. developed market revenues totaled $2.33 billion (32% of total revenues), depicting a 10% drop on a reported basis (up 2% on an organic basis).
Emerging market revenues (17% of total revenues) amounted to $1.28 billion, down 1% on a reported basis (up 2% organically).
Segment Details
The company generates revenues from four major segments, namely Cardiovascular Portfolio, Medical Surgical Portfolio, Neuroscience Portfolio and Diabetes.
In the fiscal first quarter, Cardiovascular revenues fell 1.3% at CER to $2.71 billion, reflecting low-single-digit organic decline in Cardiac Rhythm & Heart Failure (CRHF) and Coronary & Peripheral Vascular (CPV) and flat year-over-year organic performance in Structural Heart & Aortic (SHA).
CRHF sales totaled $1.39 billion, down 1.3% year over year at CER. Revenues from SHA were down 0.4% at CER to $741 million. CPV revenues were down 2.6% at CER to $579 million.
For the Cardiovascular segment, we projected $2.73 billion of revenues in the fiscal first quarter.
In Medical Surgical, worldwide sales totaled $2 billion, down 8.9% year over year at CER. The quarter registered high-single-digit declines in Surgical Innovations (SI) and Respiratory, Gastrointestinal & Renal (RGR). Excluding the impact of ventilator sales, Medical Surgical’s first-quarter revenues declined 7% year over year organically.
Our model estimated Medical Surgical revenues of $2.04 billion for Q1.
In Neuroscience, worldwide revenues of $2.12 billion were down 1.1% year over year at CER, driven by mid-single-digit organic declines in Cranial & Spinal Technologies (CST) and Neuromodulation, partially offset by mid-single-digit increases in Specialty Therapies, all on an organic basis.
For the Neuroscience segment, we projected fiscal first-quarter revenues of $1.99 billion.
Revenues in the Diabetes group rose 0.3% at CER to $541 million. Due to the lack of new product approvals, United States revenue declined in mid-teens in Q1, offset by low-double digit organic growth in non-U.S. developed markets and mid-teens organic growth in emerging markets. The company’s international sales were led by mid-twenties sales growth of continuous glucose monitoring (CGM) products and low-double-digit growth in consumable sales, offset by low-single digit declines in durable insulin pumps sales.
Our model projected Diabetes revenues of $491.5 million in Q1.
Margins
Gross margin in the reported quarter contracted 161 basis points (bps) to 65.9% on a 9.9% fall in gross profit to $4.86 billion. We projected an adjusted gross margin of 65.3% for the first quarter.
Research and development expenses fell 7.7% to $692 million. Selling, general and administrative expenses rose 0.8% to $2.57 billion.
Adjusted operating margin contracted 454 bps year over year to 21.7%. The adjusted operating margin, according to our model, was 24.3% for Q1.
Guidance
Medtronic has reaffirmed its fiscal 2023 financial guidance for revenue growth and EPS.
The company continues to expect organic revenue growth in the band of 4-5% from fiscal 2022. Considering current foreign exchange rate, fiscal 2023 revenues are expected to be negatively impacted by $1.4 to $1.5 billion (compared to the prior expectation of $1.0-$1.1 billion impact). The Zacks Consensus Estimate for the company’s fiscal 2023 worldwide revenues is pegged at $31.97 billion.
Full-year adjusted EPS projection has also been maintained in the range of $5.53 to $5.65, including an estimated 17 to 22 cents negative impact from foreign exchange. The Zacks Consensus Estimate for the year’s adjusted earnings is $5.55.
Our Take
Medtronic recorded a substantial decline in revenues and adjusted EPS in the first quarter of fiscal 2023. The year-over-year sales decline at CER across the company’s Cardiovascular, Medical Surgical and Neuroscience segments is a concern. Contraction of both margins raises apprehension too. Further, macroeconomic headwinds related to persistent inflation and unfavorable foreign currency movements continue to challenge the company’s earnings performance.
On a positive note, Medtronic exited the fiscal first quarter with better-than-expected earnings and revenues. The positive CER sales growth in the Diabetes business bodes well. The company’s sales outlook for fiscal 2023 assumes considerable organic growth from the year-ago period, instilling optimism.
Zacks Rank and Key Picks
Medtronic currently carries a Zacks Rank #4 (Sell).
Some better-ranked stocks in the broader medical space that have announced quarterly results are AMN Healthcare Services, Inc. (AMN - Free Report) , McKesson Corporation (MCK - Free Report) and Merck & Co. (MRK - Free Report) .
AMN Healthcare, sporting a Zacks Rank #1 (Strong Buy), reported second-quarter 2022 adjusted EPS of $3.31, which beat the Zacks Consensus Estimate by 11.8%. Revenues of $1.43 billion outpaced the consensus mark by 4.8%. You can see the complete list of today’s Zacks #1 Rank stocks here.
AMN Healthcare has an estimated long-term growth rate of 3.2%. AMN’s earnings surpassed estimates in all the trailing four quarters, the average being 15.7%.
McKesson, carrying a Zacks Rank #2 (Buy), reported first-quarter fiscal 2023 adjusted EPS of $5.83, which beat the Zacks Consensus Estimate by 9.8%. Revenues of $67.2 billion outpaced the consensus mark by 5.2%.
McKesson has an estimated long-term growth rate of 9.9%. MCK’s surpassed earnings estimates in the trailing three quarters and missed on one occasion, delivering a surprise of 13%, on average.
Merck reported second-quarter 2022 adjusted earnings of $1.87 per share, beating the Zacks Consensus Estimate by 11.9%. Revenues of $14.6 billion surpassed the Zacks Consensus Estimate by 5.4%. It currently has a Zacks Rank #2.
Merck has a long-term estimated growth rate of 10.1%. MRK’s earnings surpassed estimates in the trailing four quarters, the average surprise being 16.8%.
Unique Zacks Analysis of Your Chosen Ticker
Pick one free report - opportunity may be withdrawn at any time
Image: Bigstock
Medtronic (MDT) Q1 Earnings Beat Estimates, Margins Down
Medtronic plc (MDT - Free Report) reported adjusted earnings per share (EPS) of $1.13 in first-quarter fiscal 2023, beating the Zacks Consensus Estimate by 0.9%. However, adjusted earnings plunged 19.9% from the year-ago figure of $1.41 per share. Currency-adjusted EPS came in at $1.16 for the quarter.
Our model too projected an adjusted EPS of $1.13 in Q1.
Without certain one-time adjustments — including restructuring and associated costs, amortization and restructuring expenses, acquisition-related costs and certain medical device regulation charges, among others— GAAP EPS was 70 cents, reflecting a 25% surge from the year-ago reported figure.
Total Revenues
Worldwide revenues in the reported quarter grossed $7.37 billion, down 4% on an organic basis (excluding the impacts of currency) and 7.7% on a reported basis. Meanwhile, the top line exceeded the Zacks Consensus Estimate by 2.3%.
The fiscal first-quarter revenues compares to our own estimate of $7.25 billion.
The Q1 organic revenues, according to the company, reflect the unfavorable market impact of supply chain shortages, coupled with a strong comparison with high ventilator sales and a rebound in market procedures post the third COVID-19 wave in the year-ago period.
Q1 in Details
In the quarter under review, U.S. sales (51% of total revenues) declined 8% on a reported basis (down 9% on an organic basis) to $3.77 billion. Non-U.S. developed market revenues totaled $2.33 billion (32% of total revenues), depicting a 10% drop on a reported basis (up 2% on an organic basis).
Emerging market revenues (17% of total revenues) amounted to $1.28 billion, down 1% on a reported basis (up 2% organically).
Segment Details
The company generates revenues from four major segments, namely Cardiovascular Portfolio, Medical Surgical Portfolio, Neuroscience Portfolio and Diabetes.
In the fiscal first quarter, Cardiovascular revenues fell 1.3% at CER to $2.71 billion, reflecting low-single-digit organic decline in Cardiac Rhythm & Heart Failure (CRHF) and Coronary & Peripheral Vascular (CPV) and flat year-over-year organic performance in Structural Heart & Aortic (SHA).
Medtronic PLC Price, Consensus and EPS Surprise
Medtronic PLC price-consensus-eps-surprise-chart | Medtronic PLC Quote
CRHF sales totaled $1.39 billion, down 1.3% year over year at CER. Revenues from SHA were down 0.4% at CER to $741 million. CPV revenues were down 2.6% at CER to $579 million.
For the Cardiovascular segment, we projected $2.73 billion of revenues in the fiscal first quarter.
In Medical Surgical, worldwide sales totaled $2 billion, down 8.9% year over year at CER. The quarter registered high-single-digit declines in Surgical Innovations (SI) and Respiratory, Gastrointestinal & Renal (RGR). Excluding the impact of ventilator sales, Medical Surgical’s first-quarter revenues declined 7% year over year organically.
Our model estimated Medical Surgical revenues of $2.04 billion for Q1.
In Neuroscience, worldwide revenues of $2.12 billion were down 1.1% year over year at CER, driven by mid-single-digit organic declines in Cranial & Spinal Technologies (CST) and Neuromodulation, partially offset by mid-single-digit increases in Specialty Therapies, all on an organic basis.
For the Neuroscience segment, we projected fiscal first-quarter revenues of $1.99 billion.
Revenues in the Diabetes group rose 0.3% at CER to $541 million. Due to the lack of new product approvals, United States revenue declined in mid-teens in Q1, offset by low-double digit organic growth in non-U.S. developed markets and mid-teens organic growth in emerging markets. The company’s international sales were led by mid-twenties sales growth of continuous glucose monitoring (CGM) products and low-double-digit growth in consumable sales, offset by low-single digit declines in durable insulin pumps sales.
Our model projected Diabetes revenues of $491.5 million in Q1.
Margins
Gross margin in the reported quarter contracted 161 basis points (bps) to 65.9% on a 9.9% fall in gross profit to $4.86 billion. We projected an adjusted gross margin of 65.3% for the first quarter.
Research and development expenses fell 7.7% to $692 million. Selling, general and administrative expenses rose 0.8% to $2.57 billion.
Adjusted operating margin contracted 454 bps year over year to 21.7%. The adjusted operating margin, according to our model, was 24.3% for Q1.
Guidance
Medtronic has reaffirmed its fiscal 2023 financial guidance for revenue growth and EPS.
The company continues to expect organic revenue growth in the band of 4-5% from fiscal 2022. Considering current foreign exchange rate, fiscal 2023 revenues are expected to be negatively impacted by $1.4 to $1.5 billion (compared to the prior expectation of $1.0-$1.1 billion impact). The Zacks Consensus Estimate for the company’s fiscal 2023 worldwide revenues is pegged at $31.97 billion.
Full-year adjusted EPS projection has also been maintained in the range of $5.53 to $5.65, including an estimated 17 to 22 cents negative impact from foreign exchange. The Zacks Consensus Estimate for the year’s adjusted earnings is $5.55.
Our Take
Medtronic recorded a substantial decline in revenues and adjusted EPS in the first quarter of fiscal 2023. The year-over-year sales decline at CER across the company’s Cardiovascular, Medical Surgical and Neuroscience segments is a concern. Contraction of both margins raises apprehension too. Further, macroeconomic headwinds related to persistent inflation and unfavorable foreign currency movements continue to challenge the company’s earnings performance.
On a positive note, Medtronic exited the fiscal first quarter with better-than-expected earnings and revenues. The positive CER sales growth in the Diabetes business bodes well. The company’s sales outlook for fiscal 2023 assumes considerable organic growth from the year-ago period, instilling optimism.
Zacks Rank and Key Picks
Medtronic currently carries a Zacks Rank #4 (Sell).
Some better-ranked stocks in the broader medical space that have announced quarterly results are AMN Healthcare Services, Inc. (AMN - Free Report) , McKesson Corporation (MCK - Free Report) and Merck & Co. (MRK - Free Report) .
AMN Healthcare, sporting a Zacks Rank #1 (Strong Buy), reported second-quarter 2022 adjusted EPS of $3.31, which beat the Zacks Consensus Estimate by 11.8%. Revenues of $1.43 billion outpaced the consensus mark by 4.8%. You can see the complete list of today’s Zacks #1 Rank stocks here.
AMN Healthcare has an estimated long-term growth rate of 3.2%. AMN’s earnings surpassed estimates in all the trailing four quarters, the average being 15.7%.
McKesson, carrying a Zacks Rank #2 (Buy), reported first-quarter fiscal 2023 adjusted EPS of $5.83, which beat the Zacks Consensus Estimate by 9.8%. Revenues of $67.2 billion outpaced the consensus mark by 5.2%.
McKesson has an estimated long-term growth rate of 9.9%. MCK’s surpassed earnings estimates in the trailing three quarters and missed on one occasion, delivering a surprise of 13%, on average.
Merck reported second-quarter 2022 adjusted earnings of $1.87 per share, beating the Zacks Consensus Estimate by 11.9%. Revenues of $14.6 billion surpassed the Zacks Consensus Estimate by 5.4%. It currently has a Zacks Rank #2.
Merck has a long-term estimated growth rate of 10.1%. MRK’s earnings surpassed estimates in the trailing four quarters, the average surprise being 16.8%.