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Why Is Medtronic (MDT) Down 6.1% Since Last Earnings Report?
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A month has gone by since the last earnings report for Medtronic (MDT - Free Report) . Shares have lost about 6.1% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Medtronic due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Medtronic Q3 Earnings Top Estimates, Margins Contract
Medtronic reported adjusted earnings per share of $1.30 for third-quarter fiscal 2023, beating the Zacks Consensus Estimate by 3.2%. However, adjusted earnings declined 4.4% from the year-ago quarter’s figure. Currency-adjusted earnings per share came in at $1.38 in the quarter.
Without certain one-time adjustments — including restructuring and associated costs, amortization, acquisition-related costs and the new European Union medical device regulation charges, among others— GAAP earnings per share was 92 cents, down 16.4% from the year-ago quarter’s reported figure.
Total Revenues
Worldwide revenues in the reported quarter grossed $7.73 billion, up 4.1% on an organic basis (excluding the impacts of currency and contribution from the company's fiscal first-quarter acquisition of Intersect ENT) and flat year over year on a reported basis. The top line exceeded the Zacks Consensus Estimate by 3.1%.
Third-quarter organic revenues, according to the company, reflect strong performances in the Cardiovascular and Neuroscience business, in international Diabetes markets and improved product availability across certain businesses. This was partially offset by unfavorable impacts from ventilator sales, given the strong year-ago comparable due to COVID-19 severity, and sales in China, given volume-based procurement (VBP) tenders and the impact of COVID-19 resurgence on procedure volumes.
Q3 in Details
In the quarter under review, U.S. sales (52% of total revenues) were up 3% on a reported basis (up 2% on an organic basis) to $4.06 billion. Non-U.S. developed market revenues totaled $2.29 billion (30% of total revenues), down 6% on a reported basis (up 6% on an organic basis).
Emerging market revenues (18% of total revenues) amounted to $1.37 billion, down 1% on a reported basis (up 5% organically).
Segment Details
The company generates revenues from four major segments, namely Cardiovascular Portfolio, Medical Surgical Portfolio, Neuroscience Portfolio and Diabetes.
In the fiscal third quarter, Cardiovascular revenues increased 6.5% at CER to $2.77 billion, with all three divisions reporting organic growth this quarter.
Cardiac Rhythm & Heart Failure sales totaled $1.43 billion, up 7.5% year over year at CER. Revenues from Structural Heart & Aortic were up 8.8% at CER to $760 million. Coronary & Peripheral Vascular revenues were up 1.5% at CER to $581 million.
In Medical Surgical, worldwide sales totaled $2.14 billion, down 1.6% year over year at CER. The company reported low-single-digit declines in both Surgical Innovations and Respiratory, Gastrointestinal & Renal. Excluding the unfavorable impact of ventilator sales, and sales in China, given the unfavorable impact of provincial VBP tenders, Medical Surgical revenues increased 3% organic.
In Neuroscience, worldwide revenues of $2.25 billion were up 8.5% year over year at CER, driven by a low-double-digit increase in Specialty Therapies and mid-single-digit increases in Neuromodulation and Cranial & Spinal Technologies, all organically.
Revenues in the Diabetes group rose 3% at CER to $570 million. Due to the lack of new product approvals, United States revenues declined in the mid-teens in Q3, offset by high-teens growth in non-U.S. developed markets and low-twenties growth in emerging markets. The company’s international sales were led by the high-teens growth of insulin pumps, mid-thirties growth of continuous glucose monitoring (CGM) products on strong sales of the MiniMed 780G system and the associated increase in CGM attachment rates on the strength of the Guardian 4 sensor.
Margins
Gross margin in the reported quarter contracted 312 basis points (bps) to 65.2% on a 5% fall in gross profit to $5.04 billion.
Research and development expenses were up 2.9% year over year at $688 million. Selling, general and administrative expenses rose 2.1% to $2.62 billion.
Adjusted operating margin contracted 428 bps year over year to 22.5%.
Guidance
Medtronic issued fiscal 2023 fourth-quarter guidance and updated its fiscal 2023 guidance.
Fourth-quarter organic revenue growth is expected in the range of 4.5-5%. Per the FX rate as of the beginning of February, fourth-quarter revenues would be unfavorably affected by approximately $165 million to $215 million.
The Zacks Consensus Estimate for the company’s fiscal Q4 worldwide revenues is pegged at $7.97 billion.
The full-year adjusted earnings per share projection has been updated to the range of $5.28 to $5.30 (reflecting an increase in the lower end of the earlier-projected band of $5.25 to $5.30), including an estimated 21 cents negative impact from foreign exchange. The Zacks Consensus Estimate for the year’s adjusted earnings is $5.26.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
VGM Scores
At this time, Medtronic has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Medtronic has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Medtronic belongs to the Zacks Medical - Products industry. Another stock from the same industry, Cardiovascular Systems , has gained 0.2% over the past month. More than a month has passed since the company reported results for the quarter ended December 2022.
Cardiovascular Systems reported revenues of $61.45 million in the last reported quarter, representing a year-over-year change of +3.9%. EPS of -$0.20 for the same period compares with -$0.23 a year ago.
Cardiovascular Systems is expected to post a loss of $0.15 per share for the current quarter, representing a year-over-year change of +40%. Over the last 30 days, the Zacks Consensus Estimate remained unchanged.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #4 (Sell) for Cardiovascular Systems. Also, the stock has a VGM Score of D.
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Why Is Medtronic (MDT) Down 6.1% Since Last Earnings Report?
A month has gone by since the last earnings report for Medtronic (MDT - Free Report) . Shares have lost about 6.1% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Medtronic due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Medtronic Q3 Earnings Top Estimates, Margins Contract
Medtronic reported adjusted earnings per share of $1.30 for third-quarter fiscal 2023, beating the Zacks Consensus Estimate by 3.2%. However, adjusted earnings declined 4.4% from the year-ago quarter’s figure. Currency-adjusted earnings per share came in at $1.38 in the quarter.
Without certain one-time adjustments — including restructuring and associated costs, amortization, acquisition-related costs and the new European Union medical device regulation charges, among others— GAAP earnings per share was 92 cents, down 16.4% from the year-ago quarter’s reported figure.
Total Revenues
Worldwide revenues in the reported quarter grossed $7.73 billion, up 4.1% on an organic basis (excluding the impacts of currency and contribution from the company's fiscal first-quarter acquisition of Intersect ENT) and flat year over year on a reported basis. The top line exceeded the Zacks Consensus Estimate by 3.1%.
Third-quarter organic revenues, according to the company, reflect strong performances in the Cardiovascular and Neuroscience business, in international Diabetes markets and improved product availability across certain businesses. This was partially offset by unfavorable impacts from ventilator sales, given the strong year-ago comparable due to COVID-19 severity, and sales in China, given volume-based procurement (VBP) tenders and the impact of COVID-19 resurgence on procedure volumes.
Q3 in Details
In the quarter under review, U.S. sales (52% of total revenues) were up 3% on a reported basis (up 2% on an organic basis) to $4.06 billion. Non-U.S. developed market revenues totaled $2.29 billion (30% of total revenues), down 6% on a reported basis (up 6% on an organic basis).
Emerging market revenues (18% of total revenues) amounted to $1.37 billion, down 1% on a reported basis (up 5% organically).
Segment Details
The company generates revenues from four major segments, namely Cardiovascular Portfolio, Medical Surgical Portfolio, Neuroscience Portfolio and Diabetes.
In the fiscal third quarter, Cardiovascular revenues increased 6.5% at CER to $2.77 billion, with all three divisions reporting organic growth this quarter.
Cardiac Rhythm & Heart Failure sales totaled $1.43 billion, up 7.5% year over year at CER. Revenues from Structural Heart & Aortic were up 8.8% at CER to $760 million. Coronary & Peripheral Vascular revenues were up 1.5% at CER to $581 million.
In Medical Surgical, worldwide sales totaled $2.14 billion, down 1.6% year over year at CER. The company reported low-single-digit declines in both Surgical Innovations and Respiratory, Gastrointestinal & Renal. Excluding the unfavorable impact of ventilator sales, and sales in China, given the unfavorable impact of provincial VBP tenders, Medical Surgical revenues increased 3% organic.
In Neuroscience, worldwide revenues of $2.25 billion were up 8.5% year over year at CER, driven by a low-double-digit increase in Specialty Therapies and mid-single-digit increases in Neuromodulation and Cranial & Spinal Technologies, all organically.
Revenues in the Diabetes group rose 3% at CER to $570 million. Due to the lack of new product approvals, United States revenues declined in the mid-teens in Q3, offset by high-teens growth in non-U.S. developed markets and low-twenties growth in emerging markets. The company’s international sales were led by the high-teens growth of insulin pumps, mid-thirties growth of continuous glucose monitoring (CGM) products on strong sales of the MiniMed 780G system and the associated increase in CGM attachment rates on the strength of the Guardian 4 sensor.
Margins
Gross margin in the reported quarter contracted 312 basis points (bps) to 65.2% on a 5% fall in gross profit to $5.04 billion.
Research and development expenses were up 2.9% year over year at $688 million. Selling, general and administrative expenses rose 2.1% to $2.62 billion.
Adjusted operating margin contracted 428 bps year over year to 22.5%.
Guidance
Medtronic issued fiscal 2023 fourth-quarter guidance and updated its fiscal 2023 guidance.
Fourth-quarter organic revenue growth is expected in the range of 4.5-5%. Per the FX rate as of the beginning of February, fourth-quarter revenues would be unfavorably affected by approximately $165 million to $215 million.
The Zacks Consensus Estimate for the company’s fiscal Q4 worldwide revenues is pegged at $7.97 billion.
The full-year adjusted earnings per share projection has been updated to the range of $5.28 to $5.30 (reflecting an increase in the lower end of the earlier-projected band of $5.25 to $5.30), including an estimated 21 cents negative impact from foreign exchange. The Zacks Consensus Estimate for the year’s adjusted earnings is $5.26.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
VGM Scores
At this time, Medtronic has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Medtronic has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Medtronic belongs to the Zacks Medical - Products industry. Another stock from the same industry, Cardiovascular Systems , has gained 0.2% over the past month. More than a month has passed since the company reported results for the quarter ended December 2022.
Cardiovascular Systems reported revenues of $61.45 million in the last reported quarter, representing a year-over-year change of +3.9%. EPS of -$0.20 for the same period compares with -$0.23 a year ago.
Cardiovascular Systems is expected to post a loss of $0.15 per share for the current quarter, representing a year-over-year change of +40%. Over the last 30 days, the Zacks Consensus Estimate remained unchanged.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #4 (Sell) for Cardiovascular Systems. Also, the stock has a VGM Score of D.