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Lower Bulk Purchases May Weigh on Medtronic (MDT) Q3 Earnings
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Medtronic plc (MDT - Free Report) is scheduled to report third-quarter fiscal 2021 results on Feb 23, before the opening bell.
In the last-reported quarter, the company’s earnings exceeded the Zacks Consensus Estimate by 30.77%. The company missed estimates in one of the trailing four quarters and surpassed estimates in the other three, the average surprise being 57.17%.
Let’s see how things have shaped up prior to this announcement.
Factors at Play
Medtronic, which has a strong global base, is expected to have witnessed a year-over-year reduction in product demand across its core business segments (due to postponement of elective and non-COVID 19 healthcare activities through the months of November and December on resurgence of COVID-19). This might have hurt its fiscal third-quarter revenues.
Through the pandemic quarters, the company experienced reduction in the level of quarter-end customer bulk purchases. However, in a December announcement, it noted that these have led to a more even sales spread throughout the quarter. This should get reflected in third-quarter results.
Meanwhile, like all other Medical device players, following the initial hiccups, till the month of October, the company saw steady month wise trend rebound in its procedure volumes. However, as mentioned earlier, the economy shrunk partially from November through the rest of the fiscal third quarter. Accordingly, we expect to see a sequential decline in the company’s business in the third quarter.
In this regard, the company noted that till November, it saw average weekly sales tracking ahead of the same weeks in the second quarter. So while there are pockets of more restrictions and delayed procedures around the globe, the impact on Medtronic has thus far been limited.
More specifically, we are upbeat about segments involving emergent procedures that have been gaining traction compared to the more deferrable procedures. Particularly, the company is optimistic about its diabetes care, robotics surgery and neuromodulation lines. Through the months of 2020, the company has made sufficient investments in these lines of businesses to increase their capabilities.
In Diabetes business, the company noted this it recentlyinstituted an innovative R&D funding model with Blackstone, which allowed it to inject over $300 million in incremental R&D investment with an expected return profile that is better than M&A. The company recently launched the 770G hybrid closed loop insulin pump system in the United States and the 780G in Europe. Till December, both saw great market reception and the 780G in particular has had tremendous customer response in Europe. These benefits are likely to be reflected in the company’s upcoming results.
In cranial and spinal technologies, Medtronic expanded the capabilities of Mazor X robot with navigated interbody implants and integration with Midas Rex High Speed Power Drills in the third quarter. It also acquired Medicrea, with their AI-driven personalized implants and is creating a data-driven digital ecosystem for spine surgeons. This is expected to have contributed strongly to the company’s third-quarter top line.
In neuromodulation business, Medtronic launched a major technology in both pain stim and brain modulation. In pain stim, through the third quarter, it saw strong adoption of DTM therapy on Intellis spinal cord stim platform, and most of this growth came from competitive accounts. In brain modulation, the company recently launched Percept PC device. According to Medtronic, no other company has this technology. These progresses too should have positive impact on the company’s third-quarter results.
Also, in pelvic health business, the company launched InterStim Micro neurostimulator in 2020, which accelerated market expansion and led to significant share recapture.
Q3 Estimates
The Zacks Consensus Estimate for fiscal third-quarter total revenues of $7.79 billion suggests 0.9% rise from the prior-year reported number. The consensus mark for earnings of $1.19 per share implies 20.1% decline from the year-ago reported figure.
What Our Quantitative Model Predicts
Per our proven model, a stock needs to have the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to deliver an earnings surprise. But this is not the case here as you will see below.
Earnings ESP: Medtronic has an Earnings ESP of 0.00%. 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.
Stocks Worth a Look
Here are a few stocks worth considering with the right mix of elements to surpass expectations this earnings season.
Option Care Health, Inc. (OPCH - Free Report) has an Earnings ESP of +46.94% and a Zacks Rank of 2.
The Cooper Companies, Inc. (COO - Free Report) has an Earnings ESP of +1.68% and a Zacks Rank of 3.
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Lower Bulk Purchases May Weigh on Medtronic (MDT) Q3 Earnings
Medtronic plc (MDT - Free Report) is scheduled to report third-quarter fiscal 2021 results on Feb 23, before the opening bell.
In the last-reported quarter, the company’s earnings exceeded the Zacks Consensus Estimate by 30.77%. The company missed estimates in one of the trailing four quarters and surpassed estimates in the other three, the average surprise being 57.17%.
Let’s see how things have shaped up prior to this announcement.
Factors at Play
Medtronic, which has a strong global base, is expected to have witnessed a year-over-year reduction in product demand across its core business segments (due to postponement of elective and non-COVID 19 healthcare activities through the months of November and December on resurgence of COVID-19). This might have hurt its fiscal third-quarter revenues.
Through the pandemic quarters, the company experienced reduction in the level of quarter-end customer bulk purchases. However, in a December announcement, it noted that these have led to a more even sales spread throughout the quarter. This should get reflected in third-quarter results.
Medtronic PLC Price and EPS Surprise
Medtronic PLC price-eps-surprise | Medtronic PLC Quote
Meanwhile, like all other Medical device players, following the initial hiccups, till the month of October, the company saw steady month wise trend rebound in its procedure volumes. However, as mentioned earlier, the economy shrunk partially from November through the rest of the fiscal third quarter. Accordingly, we expect to see a sequential decline in the company’s business in the third quarter.
In this regard, the company noted that till November, it saw average weekly sales tracking ahead of the same weeks in the second quarter. So while there are pockets of more restrictions and delayed procedures around the globe, the impact on Medtronic has thus far been limited.
More specifically, we are upbeat about segments involving emergent procedures that have been gaining traction compared to the more deferrable procedures. Particularly, the company is optimistic about its diabetes care, robotics surgery and neuromodulation lines. Through the months of 2020, the company has made sufficient investments in these lines of businesses to increase their capabilities.
In Diabetes business, the company noted this it recentlyinstituted an innovative R&D funding model with Blackstone, which allowed it to inject over $300 million in incremental R&D investment with an expected return profile that is better than M&A. The company recently launched the 770G hybrid closed loop insulin pump system in the United States and the 780G in Europe. Till December, both saw great market reception and the 780G in particular has had tremendous customer response in Europe. These benefits are likely to be reflected in the company’s upcoming results.
In cranial and spinal technologies, Medtronic expanded the capabilities of Mazor X robot with navigated interbody implants and integration with Midas Rex High Speed Power Drills in the third quarter. It also acquired Medicrea, with their AI-driven personalized implants and is creating a data-driven digital ecosystem for spine surgeons. This is expected to have contributed strongly to the company’s third-quarter top line.
In neuromodulation business, Medtronic launched a major technology in both pain stim and brain modulation. In pain stim, through the third quarter, it saw strong adoption of DTM therapy on Intellis spinal cord stim platform, and most of this growth came from competitive accounts. In brain modulation, the company recently launched Percept PC device. According to Medtronic, no other company has this technology. These progresses too should have positive impact on the company’s third-quarter results.
Also, in pelvic health business, the company launched InterStim Micro neurostimulator in 2020, which accelerated market expansion and led to significant share recapture.
Q3 Estimates
The Zacks Consensus Estimate for fiscal third-quarter total revenues of $7.79 billion suggests 0.9% rise from the prior-year reported number. The consensus mark for earnings of $1.19 per share implies 20.1% decline from the year-ago reported figure.
What Our Quantitative Model Predicts
Per our proven model, a stock needs to have the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to deliver an earnings surprise. But this is not the case here as you will see below.
Earnings ESP: Medtronic has an Earnings ESP of 0.00%. 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.
Stocks Worth a Look
Here are a few stocks worth considering with the right mix of elements to surpass expectations this earnings season.
DENTSPLY SIRONA (XRAY - Free Report) has an Earnings ESP of +2.09% and a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Option Care Health, Inc. (OPCH - Free Report) has an Earnings ESP of +46.94% and a Zacks Rank of 2.
The Cooper Companies, Inc. (COO - Free Report) has an Earnings ESP of +1.68% and a Zacks Rank of 3.
Legal Marijuana: An Investor’s Dream
Imagine getting in early on a young industry primed to skyrocket from $17.7 billion in 2019 to an expected $73.6 billion by 2027.
Although marijuana stocks did better as the pandemic took hold than the market as a whole, they’ve been pushed down. This is exactly the right time to get in on selected strong companies at a fraction of their value before COVID struck. Zacks’ Special Report, Marijuana Moneymakers, reveals 10 exciting tickers for urgent consideration.
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