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Medtronic Displays All-Business-Line Growth Despite Cost Woes

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On Nov 28, we issued an updated research report on Medtronic plc (MDT - Free Report) ). Increased adoption of the company's globally accepted advanced therapies is encouraging. The stock has a Zacks Rank #2 (Buy).

Over the past three months, shares of Medtronic have outperformed its industry. The stock has grown 4.2% versus the industry's 2.3% dip.

Medtronic exited the second quarter of fiscal 2020 with better-than-expected numbers. All major business groups contributed to its solid top-line growth at CER, which highlighted sustainability across groups and regions in addition to successful achievement of synergy targets.

Within RTG, strong sales within spine and brain therapies more than offset sluggish growth in pain therapies. Neurosurgery business posted double-digit growth at the company’s all three offerings, namely Robotics, Navigation and Imaging.

Within Cardiac & Vascular Group (CVG), despite ongoing challenges, the company registered 1.3% growth at CER, in line with its expectation. On visible signs of overcoming the headwinds, we expect recovery any time soon. Meanwhile, multiple product lines within Pacing and TAVR showed strength in the reported quarter.

Minimally Invasive Therapies Group (MITG) arm demonstrated sturdy growth in the period on the back of strength in Surgical Innovations (SI) and the Respiratory, Gastrointestinal & Renal (RGR) divisions.

Within Diabetes group, International business grew 19%, banking on a strong rollout of the MiniMed 670G in new markets. Moreover, the company delivered double-digit growth in CGM (Continuous Glucose Monitoring) and other consumables in the quarter. In fiscal 2020, Medtronic expects to launch its MiniMed 780G (an advanced hybrid closed-loop system with bluetooth connectivity).

We are hopeful about the company's newly-unveiled restructuring initiative called Enterprise Excellence plan, aimed at $3-billion annual growth run rate savings by the end of fiscal 2022. Per the company, this new program is designed to increase its effectiveness, enable reinvestment for growth and drive consistent margin expansion as well as EPS leverage.

On the flip side, the company has been grappling with steep costs and expenses, which weigh heavily on its bottom line.

Other Key Picks

A few other top-ranked stocks in the broader medical space are Haemonetics Corporation (HAE - Free Report) , National Vision Holdings, Inc (EYE - Free Report) and ResMed Inc (RMD - Free Report) .

Haemonetics currently has a Zacks Rank of 2 and a projected long-term earnings growth rate of 13.5%.

National Vision’s long-term earnings growth rate is estimated at 17.8%. The company is Zacks #2 Ranked. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

ResMed’s long-term earnings growth rate is estimated at 12.9%. It currently flaunts a Zacks Rank #1.

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