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Here's What Will Give Shape to Medtronic's (MDT) Q3 Earnings

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Medtronic plc (MDT - Free Report) is scheduled to report third-quarter fiscal 2019 results on Feb 19, before the opening bell.

In the last reported quarter, the company’s earnings beat the Zacks Consensus Estimate by 7%. In fact, the bottom-line outpaced estimates in the trailing four quarters, the average beat being 4.1%.

Let’s see how things are shaping up prior to this announcement.

Key Catalysts

We are upbeat about the company’s successful execution of growth strategies such as therapy innovation, globalization and increase in economic value. Combined with the demographics of an aging population, these positives have started to open up opportunities for Medtronic, which should get reflected in the fiscal third-quarter results.

The therapy innovation space has been seeing multiple developments. Under Cardiac and Vascular Group ("CVG"), new therapies are helping the company gain traction in the rapidly growing MedTech market for left ventricular assist device, transcatheter aortic valve replacement, drug-coated balloons, atrial fibrillation ablation and insertable diagnostics.

Medtronic PLC Price and EPS Surprise


Over more than a year, we have observed a consistent and gradually stabilizing trend in the global cardiac rhythm and heart failure ("CRHF") market. The company is expected to register strong growth in its ICD (implantable cardioverter defibrillator) and CRT (cardiac resynchronization therapy) product lines within the scope of CRHF, banking on product launch and creation of meaningful markets.

Strong demand for the company's suite of quadripolar cardiac resynchronization therapy-pacemakers along with growth in Mechanical Circulatory Support has been driving Heart Failure division revenues. These factors are expected to show on third-quarter results as well.

In the to-be-reported quarter, Medtronic is expected to have maintained a decent market share in the core pacing banking on the back of a continued uptake of the company’s Micra Transcatheter Pacing System and the Azure next generation family of pacemakers.

Within Coronary & Structural Heart, the company is expected to gain from continued solid demand for CoreValve Evolut PRO. Moreover, the Aortic, Peripheral & Venous division is expected to gain from strength in IN.PACT Admiral drug-coated balloon and solid growth in endoVenous given strong demand for the VenaSeal closure system. Notably, Medtronic has been continuously seeing strong demand for the IN.PACT Admiral drug-coated balloon in Japan since the commercial launch last August. 

The Zacks Consensus Estimate for CVG revenues in the fiscal third quarter is pegged at $2.83 billion, 1.1% higher than the year-ago $2.80 billion.

Within Diabetes, Medtronic is likely to have sustained U.S. patient demand for its MiniMed 670G hybrid closed loop system. Outside the United States, the company is witnessing strong demand for 640G system. Also, in the previous quarter, the company launched MiniMed 670G in some European countries. This should continue to boost international diabetes revenues.

The Zacks Consensus Estimate for third-quarter Diabetes revenues stands at $623 million, 6.7% higher than the prior-year number.

In the last reported quarter, Medtronic registered 6.8% revenue growth at CER in Minimally Invasive Therapies Group (MITG), 7.8% CER growth in Restorative Therapies Group (RTG) plus 27.5% CER growth in diabetes.

In the quarter to be reported, Medtronic is anticipated to have retained its market share in MITG, riding on strength in Advanced Stapling and Advanced Energy. The company is also expected to benefit from continued strong momentum in the robotic-assisted surgery platform.

Within RTG, the company is again projected to register robust progress, particularly in Brain & Pain divisions, despite challenges in the Spine market.

Here’s What the Quantitative Model Predicts:

Our proven Zacks model shows that a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has high chances of beating estimates if it also has a positive Earnings ESP.

Medtronic has a Zacks Rank #3, which increases the predictive power of ESP. However, its Earnings ESP of -0.61% makes surprise prediction difficult. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks Worth a Look

Here are a few stocks worth considering as they have the right combination of elements to post an earnings beat in their upcoming quarterly results.

Masimo Corporation (MASI - Free Report) has an Earnings ESP of +1.04% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

CVS Health Corporation (CVS - Free Report) has an Earnings ESP of +1.11% and a Zacks Rank #3.

Wright Medical Group N.V. (WMGI - Free Report) has an Earnings ESP of +58.24% and a Zacks Rank #2.

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