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Medtronic's (MDT) Q1 Earnings Beat Estimates, Margins Up

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Medtronic plc (MDT - Free Report) reported first-quarter fiscal 2022 adjusted earnings per share (EPS) of $1.41, beating the Zacks Consensus Estimate by 6.8%. Adjusted earnings also showed a stupendous 127.4% improvement from the year-ago figure of 62 cents per share. Currency-adjusted EPS came in at $1.38 for the quarter.

Without certain one-time adjustments — including restructuring, acquisition, amortization expenses and certain European Union medical device regulations charges — GAAP EPS was 56 cents, reflecting a 55.6% surge from the year-ago reported figure.

Total Revenues

Worldwide revenues in the reported quarter grossed $7.99 billion, up 19% on an organic basis (excluding the impacts of currency) and 22.7% on a reported basis. The top line exceeded the Zacks Consensus Estimate by 1.7%.

Medtronic PLC Price, Consensus and EPS Surprise

Medtronic PLC Price, Consensus and EPS Surprise

Medtronic PLC price-consensus-eps-surprise-chart | Medtronic PLC Quote

In the quarter under review, U.S. sales (51% of total revenues) rose 22% year over year on a reported basis to $4.1 billion. Non-U.S. developed market revenues totaled $2.6 billion (33% of total revenues), depicting a 20% improvement on a reported basis (up 11% on an organic basis).

Emerging market revenues (16% of total revenues) amounted to $1.27 billion, up 31% on a reported basis (up 25% organically).

Segment Details

The company currently generates revenues from four major segments, namely Cardiovascular Portfolio, Medical Surgical Portfolio, Neuroscience Portfolio, and Diabetes.

In the fiscal first quarter, Cardiovascular revenues rose 15% at CER to $2.89 billion, reflecting low-twenties organic growth in SHA, mid-teens organic growth in CRHF, and high-single digit growth in CPV. CRHF sales totaled $1.48 billion, up 15% year over year at CER. Revenues from SHA were up 21% at CER to $787 million. CPV revenues were up 7% at CER to $620 million.

In Medical Surgical, worldwide sales totaled $2.32 billion, marking a 25% year-over-year improvement at CER with high-thirties organic growth in SI and mid-single digit organic growth in RGR. SI rose 39% while RGR registered an improvement of 3% both at CER.

In Neuroscience, worldwide revenues of $2.2 billion were up 26% year over year at CER, driven by high-thirties growth in Neuromodulation and Specialty Therapies and high-teens growth in CST, all on an organic basis. Cranial and Spinal Technologies reported 17% rise at CER. Sales in Specialty Therapies and Neuromodulation both were up 37% year over year at CER.

Revenues at the Diabetes group fell 3% at CER to $572 million. The quarter registered high single-digit growth in durable pumps, including strong growth in international markets on the continued launch of the MiniMed 780G system. This growth however was offset by mid-teens declines in U.S. sales of consumables and continuous glucose monitoring (CGM) products.

Margins

Gross margin in the reported quarter expanded 597 basis points (bps) to 67.5% on a 34.7% rise in gross profit to $5.39 billion. Adjusted operating margin expanded 1138 bps year over year to 26.2%. Selling, general and administrative expenses rose 5.4% to $2.55 billion. Research and development expenses increased 20.8% to $750 million.

Guidance

Medtronic has updated its fiscal 2022 financial guidance.

The company continues to expect organic revenue growth of approximate 9% from fiscal 2021. Considering current foreign exchange rate, fiscal 2022 revenues are expected to be positively impacted by $100 to $200 million. The Zacks Consensus Estimate for the company’s fiscal 2022 worldwide revenues is pegged at $33.29 billion.

The lower end of the full-year adjusted EPS guidance has been raised this time to a range of $5.65 to $5.75 including an estimated 5 to 10 cents positive impact from foreign exchange (the earlier band was $5.60 to $5.75 on an estimated 10 to 15 cents positive foreign exchange impact). The Zacks Consensus Estimate for the year’s adjusted earnings is $5.68.

Our Take

Medtronic’s first-quarter fiscal 2022 earnings and revenues both were ahead of the respective Zacks Consensus Estimate. Barring Diabetes, each and every operating segment and geography registered strong year-over-year growth on an organic basis.

The company's first-quarter results echoed a strong recovery from the impact of the COVID-19 pandemic on elective procedures that the company experienced in 2020. This reflected solid execution and continued procedure volume recovery, with most of the businesses at or above pre-COVID levels. The quarter’s gross and operating margins showed stupendous improvement on a year-over-year basis.

However, Medtronic’s Diabetes arm is suffering from declines in U.S. sales of consumables and CGM products.

Zacks Rank & Recent Releases

Medtronic currently has a Zacks Rank #3 (Hold).

Some stocks in the broader medical space that have announced their quarterly results are West Pharmaceutical Services, Inc. (WST - Free Report) , Encompass Health Corporation (EHC - Free Report) and Bio-Rad Laboratories, Inc. (BIO - Free Report) .

West Pharmaceutical reported second-quarter 2021 adjusted EPS of $2.46, which surpassed the Zacks Consensus Estimate by 41.4%. Second-quarter revenues of $723.6 million outpaced the Zacks Consensus Estimate by 8.7%. It currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Encompass Health, carrying a Zacks Rank #2 (Buy), reported second-quarter 2021 adjusted EPS of $1.17, which beat the Zacks Consensus Estimate by 15.8%. Second-quarter revenues of $1.3 billion outpaced the consensus mark by 1.5%.

Bio-Rad reported second-quarter 2021 adjusted EPS of $3.54, surpassing the Zacks Consensus Estimate by 86.3%. Revenues of $715.9 million surpassed the Zacks Consensus Estimate by 17.3%. It currently carries a Zacks Rank #2.