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Medtronic Demonstrates All-Line Growth Despite Cost Concerns

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On Feb 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 currently carries a Zacks Rank of 2 (Buy).

Over the past year, shares of Medtronic have outperformed the industry. The stock has rallied 9.7%, as against the industry's 1.4% fall.

Medtronic exited third-quarter fiscal 2020 on a mixed note, with earnings beating the consensus mark but revenues missing the same.

All major business groups registered solid top-line growth at CER, which highlighted sustainability across groups and regions, in addition to displaying successful achievement of synergy targets. Within Restorative Therapies Group (RTG), strong sales at Specialty and Brain therapies offset sluggish growth in Pain therapies. The Neurosurgery business posted double-digit growth at all three of the company’s offerings — Robotics, Navigation and Imaging.


Within Cardiac & Vascular Group (CVG), despite the prevaling challenges, the company recorded 1.8% growth at CER. On visible signs of overcoming these headwinds, we expect a rebound in this trend any time soon. Meanwhile, multiple product lines within Pacing and TAVR showed strength during this period. The Minimally Invasive Therapies Group (MITG) arm demonstrated sturdy growth on strength in Surgical Innovations (SI) and the Respiratory, Gastrointestinal & Renal (RGR) divisions.

Within the Diabetes group, International business registered solid mid-teen growth on the continued adoption of MiniMed 670G in overseas markets. The company has been witnessing strong enrolment in its Next Tech Pathway program, which enables purchasers of the MiniMed 670G to upgrade its next-generation pump free of cost.

 

In addition, the company witnessed double-digit growth in CGM and other consumables in the fiscal third quarter. In fiscal 2020, Medtronic expects to launch its MiniMed 780G (advanced hybrid closed-loop system with bluetooth connectivity).

Nonetheless, CVG revenues missed expectations due to a decline in customer purchasing during the period under consideration. The below-market growth rate of the company’s U.S. TAVR business also dampened the segment’s revenues. In the Diabetes group, the U.S. business declined in low double-digits due to competitive challenges.

Further, escalating costs and expenses have been persistently straining margins. Unfavorable currency movement also deterred growth during the quarter.

Other Key Picks

Other similarly-ranked stocks from the broader medical space include ResMed Inc. (RMD - Free Report) , Edwards Lifesciences Corporation (EW - Free Report) and Hill-Rom Holdings, Inc. .

ResMed has a projected long-term earnings growth rate of 14.5%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Edwards Lifesciences’ long-term earnings growth rate is estimated at 14.5%.

Hill-Rom’s long-term earnings growth rate is projected at 11.1%.

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