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Medtronic (MDT) Innovations Aid Global Growth, Volume Woe Stays
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Medtronic plc (MDT - Free Report) is gaining from the launch of globally-accepted advanced therapies. However, unfavorable currency movement and global economic uncertainties continue to affect Medtronic. The stock currently carries a Zacks Rank #3 (Hold).
Over the past year, Medtronic has outperformed the industry. The stock has declined 12% compared with the industry’s 15.6% decline.
Medtronic registered organic growth in the Cardiovascular, Neuroscience and Diabetes segments in its third quarter of fiscal 2022. Within Cardiovascular, cardiac rhythm management, one of Medtronic’s largest businesses, continued to build on the company’s category leadership, adding over 1.5 points of share. In the medical surgical portfolio, the company gained share in GI, driven by momentum from the recently launched Emprint HP Generator and Beacon endoscopic ultrasound franchise.
In Respiratory Interventions, despite the year-over-year headwind, as ventilator sales continue to return to pre-pandemic levels, Medtronic gained about 400 basis points of share in the last reported quarter. In the neuroscience portfolio, the company gained market share in Cranial and Spinal technologies.
From a geographic perspective, emerging markets (18% of total revenues) were relatively stronger compared to U.S. and non-U.S. development markets, growing 7% year over year, on strength in South Asia, Latin America and the Middle East, and Africa.
The quarter’s gross and operating margins showed improvements on a year-over-year basis. The fourth quarter of fiscal 2022 revenue guidance, indicating 4.37% year-over-year growth on a reported basis, instills investors’ optimism.
Since the start of fiscal 2022, Medtronic has been witnessing a strong recovery and displayed a return to growth. This recovery is not just driven by the recovery from the pandemic but also by the strong new product flow that Medtronic is bringing to the market over this period. Further, the increasing instances of tuck-in M&As and the implementation of a new operating model should add to the recovery momentum.
Although the pace of recovery from COVID-19 disruption was dented in the fiscal third quarter on the emergence of the Omicron variant, Medtronic noted an improvement in procedure volumes from the first few weeks of February. The company’s fourth-quarter outlook assumes continued procedure volume recovery through March and April. Medtronic expects to be back to pre-COVID levels in most of its markets before the end of the fiscal fourth quarter.
On the flip side, Medtronic’s third-quarter fiscal 2022 revenues missed the Zacks Consensus Estimate. The sluggish top-line results reflected the unfavorable market impact of COVID-19 and health system staffing shortages on medical device procedure volumes, primarily in the United States. Specifically, procedure volumes were lighter than expected in markets where the company’s products are used in the more deferrable procedures. For example, the company’s spine business was soft and procedures that require ICU bed capacity like TAVR were down in fiscal Q2.
Considering the greater-than-expected market impact of the pandemic and healthcare system staffing challenges in the fiscal second quarter, also expected to continue into the second half of fiscal 2022, Medtronic now expects fiscal 2022 organic revenue growth of 7-8%, down from the prior expectation of approximately 9%.
Medtronic noted that while it expects the impact of the COVID resurgence to diminish, the effect of the ongoing pandemic on businesses in several markets remains challenging to predict. In the third quarter of fiscal 2022, the company’s U.S. revenues were flat. Non-U.S. developed markets grew a mere 1%, given the impacts of Omicron.
Key Picks
Some better-ranked stocks in the broader medical space are McKesson Corporation (MCK - Free Report) , AMN Healthcare Services, Inc. (AMN - Free Report) and Bio-Rad Laboratories, Inc. (BIO - Free Report) .
McKesson has a long-term earnings growth rate of 11.8%. MCK has gained 49.7% compared with the industry’s 4.7% growth in the past year.
AMN Healthcare, sporting a Zacks Rank #1, has a long-term earnings growth rate of 16.2%. The company surpassed earnings estimates in the trailing four quarters, delivering a surprise of 19.5%, on average.
AMN Healthcare has outperformed its industry in the past year. AMN has gained 23.8% versus the 62% industry decline.
Bio-Rad reported fourth-quarter 2021 adjusted EPS of $3.21, which surpassed the Zacks Consensus Estimate by 11.9%. It currently has a Zacks Rank #2.
Bio-Rad has an earnings yield of 2.3% versus the industry’s negative yield. BIO surpassed earnings estimates in the trailing four quarters, the average surprise being 66.9%.
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Medtronic (MDT) Innovations Aid Global Growth, Volume Woe Stays
Medtronic plc (MDT - Free Report) is gaining from the launch of globally-accepted advanced therapies. However, unfavorable currency movement and global economic uncertainties continue to affect Medtronic. The stock currently carries a Zacks Rank #3 (Hold).
Over the past year, Medtronic has outperformed the industry. The stock has declined 12% compared with the industry’s 15.6% decline.
Medtronic registered organic growth in the Cardiovascular, Neuroscience and Diabetes segments in its third quarter of fiscal 2022. Within Cardiovascular, cardiac rhythm management, one of Medtronic’s largest businesses, continued to build on the company’s category leadership, adding over 1.5 points of share. In the medical surgical portfolio, the company gained share in GI, driven by momentum from the recently launched Emprint HP Generator and Beacon endoscopic ultrasound franchise.
In Respiratory Interventions, despite the year-over-year headwind, as ventilator sales continue to return to pre-pandemic levels, Medtronic gained about 400 basis points of share in the last reported quarter. In the neuroscience portfolio, the company gained market share in Cranial and Spinal technologies.
From a geographic perspective, emerging markets (18% of total revenues) were relatively stronger compared to U.S. and non-U.S. development markets, growing 7% year over year, on strength in South Asia, Latin America and the Middle East, and Africa.
Medtronic PLC Price
Medtronic PLC price | Medtronic PLC Quote
The quarter’s gross and operating margins showed improvements on a year-over-year basis. The fourth quarter of fiscal 2022 revenue guidance, indicating 4.37% year-over-year growth on a reported basis, instills investors’ optimism.
Since the start of fiscal 2022, Medtronic has been witnessing a strong recovery and displayed a return to growth. This recovery is not just driven by the recovery from the pandemic but also by the strong new product flow that Medtronic is bringing to the market over this period. Further, the increasing instances of tuck-in M&As and the implementation of a new operating model should add to the recovery momentum.
Although the pace of recovery from COVID-19 disruption was dented in the fiscal third quarter on the emergence of the Omicron variant, Medtronic noted an improvement in procedure volumes from the first few weeks of February. The company’s fourth-quarter outlook assumes continued procedure volume recovery through March and April. Medtronic expects to be back to pre-COVID levels in most of its markets before the end of the fiscal fourth quarter.
On the flip side, Medtronic’s third-quarter fiscal 2022 revenues missed the Zacks Consensus Estimate. The sluggish top-line results reflected the unfavorable market impact of COVID-19 and health system staffing shortages on medical device procedure volumes, primarily in the United States. Specifically, procedure volumes were lighter than expected in markets where the company’s products are used in the more deferrable procedures. For example, the company’s spine business was soft and procedures that require ICU bed capacity like TAVR were down in fiscal Q2.
Considering the greater-than-expected market impact of the pandemic and healthcare system staffing challenges in the fiscal second quarter, also expected to continue into the second half of fiscal 2022, Medtronic now expects fiscal 2022 organic revenue growth of 7-8%, down from the prior expectation of approximately 9%.
Medtronic noted that while it expects the impact of the COVID resurgence to diminish, the effect of the ongoing pandemic on businesses in several markets remains challenging to predict. In the third quarter of fiscal 2022, the company’s U.S. revenues were flat. Non-U.S. developed markets grew a mere 1%, given the impacts of Omicron.
Key Picks
Some better-ranked stocks in the broader medical space are McKesson Corporation (MCK - Free Report) , AMN Healthcare Services, Inc. (AMN - Free Report) and Bio-Rad Laboratories, Inc. (BIO - Free Report) .
McKesson, carrying a Zacks Rank #2 (Buy), reported third-quarter fiscal 2022 adjusted earnings per share (EPS) of $6.15, which beat the Zacks Consensus Estimate of $5.38 by 14.3%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
McKesson has a long-term earnings growth rate of 11.8%. MCK has gained 49.7% compared with the industry’s 4.7% growth in the past year.
AMN Healthcare, sporting a Zacks Rank #1, has a long-term earnings growth rate of 16.2%. The company surpassed earnings estimates in the trailing four quarters, delivering a surprise of 19.5%, on average.
AMN Healthcare has outperformed its industry in the past year. AMN has gained 23.8% versus the 62% industry decline.
Bio-Rad reported fourth-quarter 2021 adjusted EPS of $3.21, which surpassed the Zacks Consensus Estimate by 11.9%. It currently has a Zacks Rank #2.
Bio-Rad has an earnings yield of 2.3% versus the industry’s negative yield. BIO surpassed earnings estimates in the trailing four quarters, the average surprise being 66.9%.