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Medtronic Positive on HeartWare Buy, Covidien Synergies
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On Jun 28, 2016, we issued an updated research report on Medtronic plc (MDT - Free Report) .
Post a divergent trend in fiscal 2015, a consistent and gradually stabilizing movement in the global Cardiac Rhythm & Heart Failure (CRHF) market can be observed. This should improve further over the coming quarters.
We are currently looking forward to Medtronic’s mega $1.1 billion agreement to buy Heartware International which is expected to significantly boost its CRHF business, alongside providing a strong foothold in the global niche.
This merger will enable Medtronic to utilize HeartWare’s strong relationships with hospital customers and thereby, help build a solid position and reputation in the marketplace. The transaction is also expected to meet Medtronic`s long-term financial metrics for acquisitions.
Currently, Medtronic is not modifying its fiscal 2017 revenue or EPS guidance following this transaction. The company also expects minimal to no net EPS dilution from this transaction for the first two years as it intends to offset the expected dilutive impact. The acquisition is anticipated to be earnings accretive in the third year.
It is encouraging to note that in the last reported quarter, Medtronic witnessed strong share gains in high-power from the ongoing launch of Evera MRI ICD as well as the recent launches of the Amplia MRI and Compia MRI, Quad CRT-D. Additionally, the company recorded growth of more than 50% from TYRX infection control products. It continues to see strong above-market growth in CRHF in the coming quarters due to its differentiated MRI implantables portfolio and other new product introductions.
Meanwhile, post the Covidien acquisition, the consolidated company has so far successfully demonstrated strong segmental performances reflecting successful integration and achievement of synergy targets.
Moreover, the company’s expectation of a not-so-substantial currency headwind in fiscal 2017 compared to the previous year boosts our confidence in the stock. For fiscal 2017, Medtronic expects currency headwinds to the tune of approximately $25−$75 million based on current exchange rates on revenues.
The company is currently resorting to all possible means to boost growth. This includes penetration in emerging markets, expansion of its portfolio and restructuring of initiatives. These should benefit Medtronic over the long term. We are also encouraged by its recent foray into the rapidly growing transcatheter mitral valve replacement (TMVR) market through its recently completed $458 million acquisition of California-based medical device start-up firm, Twelve, Inc.
However, on the flip side, we note that the company is currently entangled in multiple legal issues which are weighing on the bottom line. Moreover, headwinds from a soft economy and tough competition keep us on the sidelines.
At present, Medtronic carries a Zacks Rank #3 (Hold).
Key Picks in the Sector
Some better-ranked stocks in the medical sector are ICU Medical, Inc. (ICUI - Free Report) , NuVasive, Inc. and LeMaitre Vascular, Inc. (LMAT - Free Report) . All the three stocks carry a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
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Medtronic Positive on HeartWare Buy, Covidien Synergies
On Jun 28, 2016, we issued an updated research report on Medtronic plc (MDT - Free Report) .
Post a divergent trend in fiscal 2015, a consistent and gradually stabilizing movement in the global Cardiac Rhythm & Heart Failure (CRHF) market can be observed. This should improve further over the coming quarters.
We are currently looking forward to Medtronic’s mega $1.1 billion agreement to buy Heartware International which is expected to significantly boost its CRHF business, alongside providing a strong foothold in the global niche.
This merger will enable Medtronic to utilize HeartWare’s strong relationships with hospital customers and thereby, help build a solid position and reputation in the marketplace. The transaction is also expected to meet Medtronic`s long-term financial metrics for acquisitions.
Currently, Medtronic is not modifying its fiscal 2017 revenue or EPS guidance following this transaction. The company also expects minimal to no net EPS dilution from this transaction for the first two years as it intends to offset the expected dilutive impact. The acquisition is anticipated to be earnings accretive in the third year.
It is encouraging to note that in the last reported quarter, Medtronic witnessed strong share gains in high-power from the ongoing launch of Evera MRI ICD as well as the recent launches of the Amplia MRI and Compia MRI, Quad CRT-D. Additionally, the company recorded growth of more than 50% from TYRX infection control products. It continues to see strong above-market growth in CRHF in the coming quarters due to its differentiated MRI implantables portfolio and other new product introductions.
Meanwhile, post the Covidien acquisition, the consolidated company has so far successfully demonstrated strong segmental performances reflecting successful integration and achievement of synergy targets.
Moreover, the company’s expectation of a not-so-substantial currency headwind in fiscal 2017 compared to the previous year boosts our confidence in the stock. For fiscal 2017, Medtronic expects currency headwinds to the tune of approximately $25−$75 million based on current exchange rates on revenues.
The company is currently resorting to all possible means to boost growth. This includes penetration in emerging markets, expansion of its portfolio and restructuring of initiatives. These should benefit Medtronic over the long term. We are also encouraged by its recent foray into the rapidly growing transcatheter mitral valve replacement (TMVR) market through its recently completed $458 million acquisition of California-based medical device start-up firm, Twelve, Inc.
However, on the flip side, we note that the company is currently entangled in multiple legal issues which are weighing on the bottom line. Moreover, headwinds from a soft economy and tough competition keep us on the sidelines.
At present, Medtronic carries a Zacks Rank #3 (Hold).
Key Picks in the Sector
Some better-ranked stocks in the medical sector are ICU Medical, Inc. (ICUI - Free Report) , NuVasive, Inc. and LeMaitre Vascular, Inc. (LMAT - Free Report) . All the three stocks carry a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>