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Share Gain in Core Markets to Aid Medtronic (MDT) Q4 Earnings

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Medtronic plc (MDT - Free Report) is scheduled to report fourth-quarter and fiscal 2021 results on May 27, before the opening bell.

In the lastreported quarter, the company’s earnings exceeded the Zacks Consensus Estimate by 12.17%. The company missed estimates in one of the trailing four quarters and surpassed estimates in the other three, the average surprise being 59.12%.

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 sequential rebound in product demand across its core business segments (with the market getting back to normalcy on reduced new COVID-19 case count and mass vaccine rollouts). This is likely to have boosted its fiscal fourth-quarter revenues.

Since December, the company has been consistently outperforming the markets with new products driving share gains in an increasing number of Medtronic businesses. In fact, in the last reported quarter, even excluding its strong ventilator sales, Medtronic outperformed the market. Through the months of the fiscal fourth quarter with gradual improvement in procedural volumes scenario, the company is once again expected to have maintained this bullish trend.

Medtronic PLC Price and EPS Surprise

Further, as per Medtronic’s February update, hospital customers are showing signs of recovery. Purchases of capital equipment are significantly gaining momentum. Notably, the use of Medtronic’s capital equipment like energy consoles, robotics and navigation systems, is tied directly to procedures. Hospitals are currently prioritizing spending on this type of equipment. This should get reflected in the company’s soon-to-be-reported quarter’s results.

The company earlier noted that in the fiscal fourth quarter, there will be strong recovery and its ability to return to growth will outpace its competitors. Strong new product flow in the core segments, increasing cadence of tuck-in M&As, and the recent implementation of a new operating model are expected to have contributed strongly to the company’s fourth-quartet top line.

The company expects organic revenue growth in a range between 30% and 34%,. By Operating Group, Restorative Therapies Group (RTG) organic growth was estimated to be around 50%, Cardiac & Vascular Group (CVG) around 40% and Minimally Invasive Therapies Group (MITG) around 15%, despite the continued ramp down in ventilator revenues and a tough year-over-year comparison. Diabetes organic growth is expected to be in high-single digits.

In terms of margin, considering the strong investment in product pipeline and launches, Medtronic expects sequential operating leverage as revenue improves. Overall, for the fourth quarter, the company expects around 1 point to 1.5 points improvement on gross margin and 1.5 to 2 points improvement in operating margin, both on a sequential basis.

Q4 Estimates

The Zacks Consensus Estimate for fiscal fourth-quarter total revenues of $8.14 billion suggests 35.8% rise from the prior-year reported number. The consensus mark for earnings of $1.42 per share implies 144.8% 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 with the right mix of elements to surpass expectations this earnings season.

HCA Healthcare, Inc. (HCA - Free Report) has an Earnings ESP of +105.3% and a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Beyond Air, Inc. (XAIR - Free Report) has an Earnings ESP of +11.23% and a Zacks Rank of 3.

BeyondSpring Inc. (BYSI - Free Report) has an Earnings ESP of +14.25% and a Zacks Rank of 3.

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