Back to top

Analyst Blog

Zacks Equity Research

Medtronic Partners UH to Launch Integrated Health Solutions

MDT BAX NXTM BVX

Trades from $3

Medical device and technology leader Medtronic plc (MDT - Free Report) recently announced the signing of an agreement with University Hospitals (UH) in the U.S. The Integrated Health Solutions agreement with one of the nation’s leading healthcare systems focuses on improvement of care delivery and patient experience.

Before delving into the details we must note that in the last six months, Medtronic has outshined the broader Medical product industry with respect to price. The trend, however, was disturbed in mid-November when the company reported mixed second-quarter fiscal 2017 results and trimmed the guidance for fiscal 2017.

Soon after the release, Medtronic’s share price plunged below the broader Medical Products market. Accordingly, as per the latest share movement, the stock is down 10.1%, much wider than the -6.1% for the broader industry of Medical Products over the last six months. Additionally, the company’s estimate revision trend for the full year is unfavorable. There have been 13 downward revisions with no upward revision for the last one month. Similarly, for the same period, current year estimates have slipped by 8 cents from $4.65 to $4.57.

Now coming back to the agreement, Medtronic will partner with UH to implement models, improve workflow and find operational efficiencies for catheterization (cath) and electrophysiology (EP) laboratories at UH Cleveland Medical Center. Medtronic brings its international expertise for over 100 hospital systems around the globe to manage clinical support operations in UH-select labs. Clinical support operations in cath and EP labs, such as lab management, scheduling and room turnover enable cardiologists to identify and diagnose patients' cardiovascular conditions.

UH expects to optimize its operations with Medtronic’s involvement to continue to deliver excellent cardiovascular careand better manage healthcare costs.

Medtronic claims that it has formed Integrated Health Solutions business as part of its commitment to advance healthcare delivery in more cost-effective ways by combining proper operational insights, data, medical technology and services. The agreement also indicates the expansion of Medtronic’s managed services offerings to U.S. health systems.  

Globally, hospital systems continue to find that operational efficiency is a necessary step for better clinical management. Medtronic therefore takes advantage of this growing need to expand its managed services business mainly in the U.S. In the recently concluded quarter, Medtronic saw a slowdown in its U.S. revenue growth. We expect the Integrated Health Solutions agreement to boost the company’s revenues in the U.S. going ahead.

Zacks Rank & Key Picks

Medtronic currently carries a Zacks Rank #4 (Sell). Better-ranked medical stocks are NxStage Medical Inc. (NXTM - Free Report) , Baxter International Inc. (BAX - Free Report) and Bovie Medical Corporation (BVX - Free Report) . NxStage Medical and Baxter International sport a Zacks Rank #1 (Strong Buy) while Bovie Medical carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

NxStage Medical surged 22.5% over the last one year compared to the S&P 500’s 5.7% over the same period. The company has a four-quarter average positive earnings surprise of 50.00%.

Baxter International rallied 18.7% over one year, much higher than the S&P 500. It has a trailing four-quarter average positive earnings surprise of 27%.

Bovie Medical recorded a 125.7% gain in the past one year, way better than the S&P 500. The company has a trailing four-quarter positive average earnings surprise of 28.7%.

Confidential from Zacks

Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>