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Medtronic plc (MDT - Free Report) reported financial results for fourth-quarter and fiscal 2016.
Adjusted earnings per share (EPS) in the reported quarter came in at $1.27, a penny ahead of the Zacks Consensus Estimate and up 9.5% year over year. Adjustments in the quarter primarily included certain special charges as well as restructuring charges, intangible asset amortization, acquisition-related items and certain tax adjustments.
Without these adjustments, the company reported net income of 78 cents per share, compared to breakeven results in the year-ago quarter.
Full-year adjusted earnings came in at $4.37 per share, marking a 2% improvement from the year-ago number, but in line with the Zacks Consensus Estimate.
Worldwide revenues in the reported quarter grossed $7.567 billion, up 6% year over year on a comparable basis at constant exchange rates or CER (up 4% as reported). The top line exceeded the Zacks Consensus Estimate of $7.482 billion. Foreign currency fluctuation adversely affected Medtronic’s fourth-quarter revenues by $179 million.
Full-year 2016 total revenue was $28.83 billion, a 7% improvement from the previous year at CER (up 42% as reported). The Zacks Consensus Estimate of $28.75 billion for revenues remained just below the company’s 2016 top-line number.
In the quarter under review, U.S. sales (56% of total sales) increased 4% year over year to $4.217 billion. Non-U.S. developed market revenues totalled $2.393 billion (31% of total sales), up 6% at CER (up 3% as reported). Emerging market revenues experienced continued growth momentum and increased 15% (up 4% as reported) to $957 million at CER.
Segment Details
The combined company currently generates revenues from four major groups, viz. Cardiac & Vascular Group (CVG), Minimally Invasive Therapies Group (MITG), Restorative Therapies Group (RTG) and Diabetes Group.
CVG comprises Cardiac Rhythm & Heart Failure (CRHF), Coronary & Structural Heart (CSH), and Aortic & Peripheral Vascular divisions (APV). MITG includes both the Surgical Solutions division and the Patient Monitoring & Recovery (PMR) division. RTG includes the Spine, Neuromodulation, Surgical Technologies and Neurovascular segments, while the Diabetes Group includes the Intensive Insulin Management, Non-Intensive Diabetes Therapies and Diabetes Services & Solutions divisions.
Revenues from CVG improved 8% at CER (or 5% as reported) to $2.736 billion, driven by strong, balanced growth across all divisions. CRHF sales were up 9% (7% as reported) to $1.492 billion, on account of the Amplia MRI and Compia MRI Quad CRT-D launches in the U.S., adoption of the Micra TPS pacemaker in Europe, continued adoption of the Reveal LINQ insertable cardiac monitor and mid-thirties growth in AF Solutions.
CSH revenues grew 7% (up 3% as reported) to $816 million on the back of high-twenties growth in transcatheter valves owing to strong customer adoption of the CoreValveEvolut R, as well as low-single digits growth in Coronary, driven by Resolute Onyx in Europe and emerging markets. APV revenues grew 8% (up 5% as reported) to $428 million, driven by mid-single digit growth on a constant currency basis in Aortic.
In MITG, worldwide sales reached $3.460 billion, up 6% year over year at CER (up 3% as reported), driven by above-market growth in Surgical Solutions and low-single digit growth in PMR. While Surgical Solutions improved 9% to $1.358 billion, PMR edged up 1% to $1.102 billion, both at CER.
In RTG, worldwide revenues of $1.875 billion were up 3% year over year (up 1% as reported), driven by strong growth in Neurovascular and Surgical Technologies, as well as improved results in Spine offsetting a decline in Neuromodulation. Revenues from the Diabetes group went up 10% (or up 6% as reported) to $496 million on account of strong, broad-based performance across its three divisions.
Margin
Gross margin during the reported quarter expanded 894 basis points (bps) to 68.8% on a 19.1% increase in gross profit to $5.204 billion. Adjusted operating margin expanded 1030 bps year over year to 29.9%, with a 1.8% decline in selling, general and administrative expenses (to $575 million); a 8.9% increase in research and development expenses (to $5456 million); and a 5% rise in Other income to $21 million.
Guidance
Medtronic has provided its fiscal 2017 initial revenue outlook and EPS guidance. Management expects adjusted diluted EPS in the range of $4.60−$4.70, which includes an expected 20–25 cents of negative currency impact based on current exchange rates. The Zacks Consensus Estimate of $4.69 remains close to the upper end of the guided range.
Medtronic’s current baseline goal is to consistently grow revenues in the mid-single digits at CER. In fiscal 2017, given the current trends, the company expects revenues to grow at the upper-half of the mid-single digit range and also excludes the estimated negative 150 bps impact from the extra selling it had in the first quarter of fiscal 2016. Medtronic expects negative impact from foreign currency of approximately $25−$75 million in fiscal 2017 based on current exchange rates.
Our Take
Medtronic ended fiscal 2016 on a promising note with fourth-quarter earnings and revenues both surpassing the Zacks Consensus Estimate. The consolidated company demonstrated strong segmental performances, reflecting successful integration and achievement of synergy targets.
All four major business groups contributed to solid top-line growth on above-market revenue growth which, according to the company, highlighted sustainability across groups and regions. We are also impressed with the solid growth trend successfully continuing in the U.S. as well as the healthy global acceptance of its advanced therapies. Apart from product innovation, the company is currently focusing on geographical diversification of its businesses.
The Covidien acquisition continues to bolster the long-term sustainability and consistency of the company’s revenue growth expectations. Finally, the combined company was successful in generating significant free cash flow, which management plans to reinvest in future growth opportunities while also providing strong returns to Medtronic’s shareholders.
However, the company is expected to face substantial currency headwinds even in fiscal 2017.
Zacks Rank
Currently, Medtronic holds a Zacks Rank #4 (Sell). Some better-ranked stocks in the medical sector are Boston Scientific Corporation (BSX - Free Report) , ICU Medical, Inc. (ICUI - Free Report) and LeMaitre Vascular, Inc. (LMAT - Free Report) . All the three stocks hold a Zacks Rank #2 (Buy).
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Medtronic (MDT) Beats Q4 Earnings & Revenue Estimates
Medtronic plc (MDT - Free Report) reported financial results for fourth-quarter and fiscal 2016.
Adjusted earnings per share (EPS) in the reported quarter came in at $1.27, a penny ahead of the Zacks Consensus Estimate and up 9.5% year over year. Adjustments in the quarter primarily included certain special charges as well as restructuring charges, intangible asset amortization, acquisition-related items and certain tax adjustments.
Without these adjustments, the company reported net income of 78 cents per share, compared to breakeven results in the year-ago quarter.
Full-year adjusted earnings came in at $4.37 per share, marking a 2% improvement from the year-ago number, but in line with the Zacks Consensus Estimate.
Total Revenue
Worldwide revenues in the reported quarter grossed $7.567 billion, up 6% year over year on a comparable basis at constant exchange rates or CER (up 4% as reported). The top line exceeded the Zacks Consensus Estimate of $7.482 billion. Foreign currency fluctuation adversely affected Medtronic’s fourth-quarter revenues by $179 million.
Full-year 2016 total revenue was $28.83 billion, a 7% improvement from the previous year at CER (up 42% as reported). The Zacks Consensus Estimate of $28.75 billion for revenues remained just below the company’s 2016 top-line number.
In the quarter under review, U.S. sales (56% of total sales) increased 4% year over year to $4.217 billion. Non-U.S. developed market revenues totalled $2.393 billion (31% of total sales), up 6% at CER (up 3% as reported). Emerging market revenues experienced continued growth momentum and increased 15% (up 4% as reported) to $957 million at CER.
Segment Details
The combined company currently generates revenues from four major groups, viz. Cardiac & Vascular Group (CVG), Minimally Invasive Therapies Group (MITG), Restorative Therapies Group (RTG) and Diabetes Group.
CVG comprises Cardiac Rhythm & Heart Failure (CRHF), Coronary & Structural Heart (CSH), and Aortic & Peripheral Vascular divisions (APV). MITG includes both the Surgical Solutions division and the Patient Monitoring & Recovery (PMR) division. RTG includes the Spine, Neuromodulation, Surgical Technologies and Neurovascular segments, while the Diabetes Group includes the Intensive Insulin Management, Non-Intensive Diabetes Therapies and Diabetes Services & Solutions divisions.
Revenues from CVG improved 8% at CER (or 5% as reported) to $2.736 billion, driven by strong, balanced growth across all divisions. CRHF sales were up 9% (7% as reported) to $1.492 billion, on account of the Amplia MRI and Compia MRI Quad CRT-D launches in the U.S., adoption of the Micra TPS pacemaker in Europe, continued adoption of the Reveal LINQ insertable cardiac monitor and mid-thirties growth in AF Solutions.
CSH revenues grew 7% (up 3% as reported) to $816 million on the back of high-twenties growth in transcatheter valves owing to strong customer adoption of the CoreValveEvolut R, as well as low-single digits growth in Coronary, driven by Resolute Onyx in Europe and emerging markets. APV revenues grew 8% (up 5% as reported) to $428 million, driven by mid-single digit growth on a constant currency basis in Aortic.
In MITG, worldwide sales reached $3.460 billion, up 6% year over year at CER (up 3% as reported), driven by above-market growth in Surgical Solutions and low-single digit growth in PMR. While Surgical Solutions improved 9% to $1.358 billion, PMR edged up 1% to $1.102 billion, both at CER.
In RTG, worldwide revenues of $1.875 billion were up 3% year over year (up 1% as reported), driven by strong growth in Neurovascular and Surgical Technologies, as well as improved results in Spine offsetting a decline in Neuromodulation. Revenues from the Diabetes group went up 10% (or up 6% as reported) to $496 million on account of strong, broad-based performance across its three divisions.
Margin
Gross margin during the reported quarter expanded 894 basis points (bps) to 68.8% on a 19.1% increase in gross profit to $5.204 billion. Adjusted operating margin expanded 1030 bps year over year to 29.9%, with a 1.8% decline in selling, general and administrative expenses (to $575 million); a 8.9% increase in research and development expenses (to $5456 million); and a 5% rise in Other income to $21 million.
Guidance
Medtronic has provided its fiscal 2017 initial revenue outlook and EPS guidance. Management expects adjusted diluted EPS in the range of $4.60−$4.70, which includes an expected 20–25 cents of negative currency impact based on current exchange rates. The Zacks Consensus Estimate of $4.69 remains close to the upper end of the guided range.
Medtronic’s current baseline goal is to consistently grow revenues in the mid-single digits at CER. In fiscal 2017, given the current trends, the company expects revenues to grow at the upper-half of the mid-single digit range and also excludes the estimated negative 150 bps impact from the extra selling it had in the first quarter of fiscal 2016. Medtronic expects negative impact from foreign currency of approximately $25−$75 million in fiscal 2017 based on current exchange rates.
Our Take
Medtronic ended fiscal 2016 on a promising note with fourth-quarter earnings and revenues both surpassing the Zacks Consensus Estimate. The consolidated company demonstrated strong segmental performances, reflecting successful integration and achievement of synergy targets.
All four major business groups contributed to solid top-line growth on above-market revenue growth which, according to the company, highlighted sustainability across groups and regions. We are also impressed with the solid growth trend successfully continuing in the U.S. as well as the healthy global acceptance of its advanced therapies. Apart from product innovation, the company is currently focusing on geographical diversification of its businesses.
The Covidien acquisition continues to bolster the long-term sustainability and consistency of the company’s revenue growth expectations. Finally, the combined company was successful in generating significant free cash flow, which management plans to reinvest in future growth opportunities while also providing strong returns to Medtronic’s shareholders.
However, the company is expected to face substantial currency headwinds even in fiscal 2017.
Zacks Rank
Currently, Medtronic holds a Zacks Rank #4 (Sell). Some better-ranked stocks in the medical sector are Boston Scientific Corporation (BSX - Free Report) , ICU Medical, Inc. (ICUI - Free Report) and LeMaitre Vascular, Inc. (LMAT - Free Report) . All the three stocks hold a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>