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Medtronic (MDT) Q4 Earnings: Stock Likely to Beat Again?
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We expect Ireland-based medical device major Medtronic plc (MDT - Free Report) to beat expectations when it reports its fourth-quarter and fiscal 2017 results on May 25, before the opening bell.
Last quarter, the company posted earnings of $1.12 per share, surpassing the Zacks Consensus Estimate by a penny. In fact, Medtronic’s earnings outpaced the Zacks Consensus Estimate in all of the past four quarters with an average beat of 1.14%. Let’s see how things are shaping up prior to this announcement.
Why a Likely Positive Surprise?
Our proven model shows that Medtronic is likely to beat earnings because it has the perfect combination of two key ingredients.
Zacks ESP: Medtronic has an Earnings ESP of +0.76% as the Most Accurate estimate is $1.32 while the Zacks Consensus Estimate is pegged at $1.31. A favorable Zacks ESP serves as a meaningful and leading indicator of a likely positive earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Medtronic currently carries a Zacks Rank #3 (Hold). Note that stocks with Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 have a significantly higher chance of beating earnings estimates.
Conversely, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
The combination of a favorable Zacks Rank and a positive ESP makes us reasonably confident of an earnings beat.
What is Driving the Better-than-Expected Earnings?
We are looking forward to Medtronic delivering another quarter of solid growth performance on crisp execution of its three growth strategies, therapy innovation, globalization and economic value.Combined with the demographics of an aging population, these tailwinds have already started to generate sustained long-term opportunities for Medtronic, which should get reflected in the fourth quarter as well.
Within therapy innovation, there have been multiple developments. Under the Cardiac and vascular group, new therapies are helping it capture the rapidly growing MedTech markets such as LVAD, TAVR, drug-coated balloons, AF ablation, and insertable diagnostics.
Within cardiac rhythm implantables, the company is fast capturing market share as a result of its differentiated 3T MRI technology. Within TAVR, we expect Medtronic to register strong growth in the quarter on the back of the recent launch of the Evolut R 34-millimeter valve. The recent CMS reimbursement coverage for Micra Transcatheter Pacing System (TPS) – the world's smallest pacemaker – is likely to accelerate its sales in the U.S., drive pacemaker market growth and increase market share. This should also start getting reflected from the fourth quarter itself.
This apart, we note that, over the recent past, coronary sales performance was a drag to the company’s overall top-line show. This was mainly due to sluggish Drug Eluting stent (DES) performance, particularly in the U.S. and Japan. However, the recent FDA approval of the Resolute Onyx DES should turn this ongoing U.S. DES sales decline to meaningful growth by fiscal 2018.
However, Medtronic is apprehensive that Diabetes growth probably slowed down in the fourth quarter due to postponement of purchases as the full launch of the MiniMed 670G is approaching.
We are also waiting to see the impact of Medtronic’s recent definitive agreement with Cardinal to sell its Patient Care, Deep Vein Thrombosis and Nutritional Insufficiency businesses within the Patient Monitoring & Recovery division of its Minimally Invasive Therapies Group.
In this regard we note that, for the fiscal fourth quarter, there has been no change in the estimate revision trend over the last seven days. The same can be observed in the magnitude of the estimate revision trend with earnings estimates remaining at $1.31, over the same time frame.
With Medtronic recording a significant percentage of its sales from the international market, downsides may come from currency fluctuations. Unfavorable currency movements have been a major dampener for the company over the last few quarters. Considering this impact, for fiscal 2017, Medtronic anticipates currency headwind to the tune of approximately 20 cents.
Other Stocks to Consider
Here are some other companies you may want to consider as our proven model shows they have the right combination of elements to post an earnings beat in the upcoming quarter:
Big Lots, Inc. (BIG - Free Report) has an Earnings ESP of +2.00% and a Zacks Rank #3.
Coupa Software Incorporated has an Earnings ESP of +4.00% and a Zacks Rank #3.
Zacks' 2017 IPO Watch List
Before looking into the stocks mentioned above, you may want to get a head start on potential tech IPOs that are popping up on Zacks' radar. Imagine being in the first wave of investors to jump on a company with almost unlimited growth potential? This Special Report gives you the current scoop on 5 that may go public at any time.
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Medtronic (MDT) Q4 Earnings: Stock Likely to Beat Again?
We expect Ireland-based medical device major Medtronic plc (MDT - Free Report) to beat expectations when it reports its fourth-quarter and fiscal 2017 results on May 25, before the opening bell.
Last quarter, the company posted earnings of $1.12 per share, surpassing the Zacks Consensus Estimate by a penny. In fact, Medtronic’s earnings outpaced the Zacks Consensus Estimate in all of the past four quarters with an average beat of 1.14%. Let’s see how things are shaping up prior to this announcement.
Why a Likely Positive Surprise?
Our proven model shows that Medtronic is likely to beat earnings because it has the perfect combination of two key ingredients.
Zacks ESP: Medtronic has an Earnings ESP of +0.76% as the Most Accurate estimate is $1.32 while the Zacks Consensus Estimate is pegged at $1.31. A favorable Zacks ESP serves as a meaningful and leading indicator of a likely positive earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Medtronic currently carries a Zacks Rank #3 (Hold). Note that stocks with Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 have a significantly higher chance of beating earnings estimates.
Conversely, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
The combination of a favorable Zacks Rank and a positive ESP makes us reasonably confident of an earnings beat.
Medtronic PLC Price and EPS Surprise
Medtronic PLC Price and EPS Surprise | Medtronic PLC Quote
What is Driving the Better-than-Expected Earnings?
We are looking forward to Medtronic delivering another quarter of solid growth performance on crisp execution of its three growth strategies, therapy innovation, globalization and economic value.Combined with the demographics of an aging population, these tailwinds have already started to generate sustained long-term opportunities for Medtronic, which should get reflected in the fourth quarter as well.
Within therapy innovation, there have been multiple developments. Under the Cardiac and vascular group, new therapies are helping it capture the rapidly growing MedTech markets such as LVAD, TAVR, drug-coated balloons, AF ablation, and insertable diagnostics.
Within cardiac rhythm implantables, the company is fast capturing market share as a result of its differentiated 3T MRI technology. Within TAVR, we expect Medtronic to register strong growth in the quarter on the back of the recent launch of the Evolut R 34-millimeter valve. The recent CMS reimbursement coverage for Micra Transcatheter Pacing System (TPS) – the world's smallest pacemaker – is likely to accelerate its sales in the U.S., drive pacemaker market growth and increase market share. This should also start getting reflected from the fourth quarter itself.
This apart, we note that, over the recent past, coronary sales performance was a drag to the company’s overall top-line show. This was mainly due to sluggish Drug Eluting stent (DES) performance, particularly in the U.S. and Japan. However, the recent FDA approval of the Resolute Onyx DES should turn this ongoing U.S. DES sales decline to meaningful growth by fiscal 2018.
However, Medtronic is apprehensive that Diabetes growth probably slowed down in the fourth quarter due to postponement of purchases as the full launch of the MiniMed 670G is approaching.
We are also waiting to see the impact of Medtronic’s recent definitive agreement with Cardinal to sell its Patient Care, Deep Vein Thrombosis and Nutritional Insufficiency businesses within the Patient Monitoring & Recovery division of its Minimally Invasive Therapies Group.
In this regard we note that, for the fiscal fourth quarter, there has been no change in the estimate revision trend over the last seven days. The same can be observed in the magnitude of the estimate revision trend with earnings estimates remaining at $1.31, over the same time frame.
With Medtronic recording a significant percentage of its sales from the international market, downsides may come from currency fluctuations. Unfavorable currency movements have been a major dampener for the company over the last few quarters. Considering this impact, for fiscal 2017, Medtronic anticipates currency headwind to the tune of approximately 20 cents.
Other Stocks to Consider
Here are some other companies you may want to consider as our proven model shows they have the right combination of elements to post an earnings beat in the upcoming quarter:
Bed Bath & Beyond Inc. has an Earnings ESP of +1.54% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
Big Lots, Inc. (BIG - Free Report) has an Earnings ESP of +2.00% and a Zacks Rank #3.
Coupa Software Incorporated has an Earnings ESP of +4.00% and a Zacks Rank #3.
Zacks' 2017 IPO Watch List
Before looking into the stocks mentioned above, you may want to get a head start on potential tech IPOs that are popping up on Zacks' radar. Imagine being in the first wave of investors to jump on a company with almost unlimited growth potential? This Special Report gives you the current scoop on 5 that may go public at any time.
One has driven from 0 to a $68 billion valuation in 8 years. Four others are a little less obvious but already show jaw-dropping growth. Download this IPO Watch List today for free >>