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Here's Why You Should Retain Medtronic (MDT) Stock for Now
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Medtronic plc (MDT - Free Report) is likely to grow in the coming quarters, backed by remarkable progress within the Cardiovascular portfolio. The Cranial and Spinal technologies business within the company’s Neuroscience portfolio has been registering strong growth in recent quarters. Favorable solvency is highly encouraging.
Meanwhile, macroeconomic challenges may have an adverse impact on the company’s operations. Intense competition from peers is also concerning.
In the past year, this Zacks Rank #3 (Hold) stock has increased 9.7% compared with the industry’s 10.7% rise and a 32.9% increase of the S&P 500 composite.
The renowned medical device company has a market capitalization of $113.04 billion. Medtronic has an earnings yield of 6.11% against the industry’s yield of -0.72%. The company’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 4.46%.
Let’s delve deeper.
Tailwinds
Market Share Gains Within Cardiovascular to Continue: Medtronic is strongly expanding its global foothold within the company’s Cardiovascular business. One of the company’s largest businesses, cardiac rhythm management, continues to build on MDT’s category leadership. Medtronic’s Cardiac Pacing business is driving strong growth following the launch of the company’s next-generation Micra AV2 and VR2 devices in the United States.
The company has continued with the strong global growth of its Micra leadless pacemaker family as it enters new geographies and expands penetration in existing markets. Further, ICDs (Implantable cardioverter-defibrillators) within cardiac rhythm management are gaining in terms of market share following the FDA nod and CE Mark for the Aurora Extravascular ICD.
Image Source: Zacks Investment Research
Within Structural Heart, MDT won TAVR (Transcatheter aortic valve replacement) share globally in the fiscal third quarter on the strength of Evolut FX. Specifically, in Europe, Evolut FX generated revenues for the first full quarter following its approval. In Japan, too, TAVR continued to win market share on the continued adoption of Evolut FX for patients with expanded end-stage renal disease indication.
Neurosurgery Portfolio Shows Strong Growth Prospects: In the fiscal third quarter, the segment once again registered above-market growth due to the continued adoption of the AiBLE ecosystem. The Cranial and Spinal technologies delivered high-single-digit growth in Core Spine, mid-teens growth in biologics and high-single-digit growth in enabling technology. Medtronic’s global footprint, spanning more than 10,000 systems, is now more than four times greater than its nearest competitor owing to AiBLE.
In addition, the Specialty Therapies business is also gaining from the strong performances of the company’s hemorrhagic stroke flow diversion products. Within the division, the ENT business in the Neuroscience portfolio continues to contribute positively. In Neuromodulation, the company is gaining new implant shares in both pain Stim and DBS (Deep Brain Stimulation). As the latest development within the Percept family, the Percept RC DBS system received FDA approval in January 2024.
Stable Liquidity Position: The company’s cash and cash equivalents were $8.32 billion at the end of the third quarter of fiscal 2024, while total debt (including the current portion) remained at $25.18 billion. The short-term payable debt of $1.03 billion remains lower than the short-term cash level. MDT’s times interest earned ratio of 8.9 compares with 9 at the end of the fiscal second quarter.
Downsides
Macroeconomic Issues Hamper Several Markets: Medtronic noted that while the impact of the COVID-19 resurgence has diminished, in several of its markets, supply constraint recovery is slow. With regard to procedural volumes, in addition to an incremental China VBP, the company is still seeing lower volumes in elective coronary PCI, GI procedures, TAVR, spinal cord stim and some less emergent surgical procedures. The slower-than-anticipated recovery in procedural volumes primarily occurred in developed markets as healthcare systems continued to work through staffing and other challenges.
Competitive Landscape: The presence of a large number of players has made the medical device market highly competitive. Medtronic earns the majority of revenues from the CRDM, Spinal and Cardio Vascular segments. The company faces intense competition in the CRDM segment from players such as Boston Scientific Corporation. Players such as Johnson & Johnson, Stryker Corporation, Zimmer and NuVasive have intensified competition, particularly in the Spinal segment.
Estimate Trend
The Zacks Consensus Estimate for Medtronic’s fiscal 2024 earnings per share (EPS) has moved up from $5.16 to $5.20 in the past 30 days.
The consensus estimate for the company’s fiscal 2024 revenues is pegged at $8.44 billion, a 1.3% decrease from the year-ago reported number.
Cardinal Health has a long-term estimated earnings growth rate of 14.2% compared with the industry’s 11.6%. CAH’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 15.64%. Its shares have increased 64.7% compared with the industry’s 18.2% rise in the past year.
Stryker, carrying a Zacks Rank #2 (Buy) at present, has an earnings yield of 3.31% against the industry’s -0.72%. Shares of the company have increased 33.3% compared with the industry’s 11.3% rise over the past year.
SYK’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 5.09%. In the last reported quarter, it delivered an average earnings surprise of 5.81%.
DaVita, sporting a Zacks Rank #1 at present, has an estimated long-term earnings growth rate of 12.1% compared with the industry’s 11.2%. Shares of DVA have rallied 81% compared with the industry’s 27.1% rise over the past year.
DVA’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 35.57%. In the last reported quarter, it delivered an average earnings surprise of 22.2%.
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Here's Why You Should Retain Medtronic (MDT) Stock for Now
Medtronic plc (MDT - Free Report) is likely to grow in the coming quarters, backed by remarkable progress within the Cardiovascular portfolio. The Cranial and Spinal technologies business within the company’s Neuroscience portfolio has been registering strong growth in recent quarters. Favorable solvency is highly encouraging.
Meanwhile, macroeconomic challenges may have an adverse impact on the company’s operations. Intense competition from peers is also concerning.
In the past year, this Zacks Rank #3 (Hold) stock has increased 9.7% compared with the industry’s 10.7% rise and a 32.9% increase of the S&P 500 composite.
The renowned medical device company has a market capitalization of $113.04 billion. Medtronic has an earnings yield of 6.11% against the industry’s yield of -0.72%. The company’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 4.46%.
Let’s delve deeper.
Tailwinds
Market Share Gains Within Cardiovascular to Continue: Medtronic is strongly expanding its global foothold within the company’s Cardiovascular business. One of the company’s largest businesses, cardiac rhythm management, continues to build on MDT’s category leadership. Medtronic’s Cardiac Pacing business is driving strong growth following the launch of the company’s next-generation Micra AV2 and VR2 devices in the United States.
The company has continued with the strong global growth of its Micra leadless pacemaker family as it enters new geographies and expands penetration in existing markets. Further, ICDs (Implantable cardioverter-defibrillators) within cardiac rhythm management are gaining in terms of market share following the FDA nod and CE Mark for the Aurora Extravascular ICD.
Image Source: Zacks Investment Research
Within Structural Heart, MDT won TAVR (Transcatheter aortic valve replacement) share globally in the fiscal third quarter on the strength of Evolut FX. Specifically, in Europe, Evolut FX generated revenues for the first full quarter following its approval. In Japan, too, TAVR continued to win market share on the continued adoption of Evolut FX for patients with expanded end-stage renal disease indication.
Neurosurgery Portfolio Shows Strong Growth Prospects: In the fiscal third quarter, the segment once again registered above-market growth due to the continued adoption of the AiBLE ecosystem. The Cranial and Spinal technologies delivered high-single-digit growth in Core Spine, mid-teens growth in biologics and high-single-digit growth in enabling technology. Medtronic’s global footprint, spanning more than 10,000 systems, is now more than four times greater than its nearest competitor owing to AiBLE.
In addition, the Specialty Therapies business is also gaining from the strong performances of the company’s hemorrhagic stroke flow diversion products. Within the division, the ENT business in the Neuroscience portfolio continues to contribute positively. In Neuromodulation, the company is gaining new implant shares in both pain Stim and DBS (Deep Brain Stimulation). As the latest development within the Percept family, the Percept RC DBS system received FDA approval in January 2024.
Stable Liquidity Position: The company’s cash and cash equivalents were $8.32 billion at the end of the third quarter of fiscal 2024, while total debt (including the current portion) remained at $25.18 billion. The short-term payable debt of $1.03 billion remains lower than the short-term cash level. MDT’s times interest earned ratio of 8.9 compares with 9 at the end of the fiscal second quarter.
Downsides
Macroeconomic Issues Hamper Several Markets: Medtronic noted that while the impact of the COVID-19 resurgence has diminished, in several of its markets, supply constraint recovery is slow. With regard to procedural volumes, in addition to an incremental China VBP, the company is still seeing lower volumes in elective coronary PCI, GI procedures, TAVR, spinal cord stim and some less emergent surgical procedures. The slower-than-anticipated recovery in procedural volumes primarily occurred in developed markets as healthcare systems continued to work through staffing and other challenges.
Competitive Landscape: The presence of a large number of players has made the medical device market highly competitive. Medtronic earns the majority of revenues from the CRDM, Spinal and Cardio Vascular segments. The company faces intense competition in the CRDM segment from players such as Boston Scientific Corporation. Players such as Johnson & Johnson, Stryker Corporation, Zimmer and NuVasive have intensified competition, particularly in the Spinal segment.
Estimate Trend
The Zacks Consensus Estimate for Medtronic’s fiscal 2024 earnings per share (EPS) has moved up from $5.16 to $5.20 in the past 30 days.
The consensus estimate for the company’s fiscal 2024 revenues is pegged at $8.44 billion, a 1.3% decrease from the year-ago reported number.
Key Picks
Some better-ranked stocks in the broader medical space are Cardinal Health (CAH - Free Report) , Stryker (SYK - Free Report) and DaVita (DVA - Free Report) .
Cardinal Health has a long-term estimated earnings growth rate of 14.2% compared with the industry’s 11.6%. CAH’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 15.64%. Its shares have increased 64.7% compared with the industry’s 18.2% rise in the past year.
CAH sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Stryker, carrying a Zacks Rank #2 (Buy) at present, has an earnings yield of 3.31% against the industry’s -0.72%. Shares of the company have increased 33.3% compared with the industry’s 11.3% rise over the past year.
SYK’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 5.09%. In the last reported quarter, it delivered an average earnings surprise of 5.81%.
DaVita, sporting a Zacks Rank #1 at present, has an estimated long-term earnings growth rate of 12.1% compared with the industry’s 11.2%. Shares of DVA have rallied 81% compared with the industry’s 27.1% rise over the past year.
DVA’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 35.57%. In the last reported quarter, it delivered an average earnings surprise of 22.2%.