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Medtronic (MDT) to Report Q3 Earnings: What's in Store?
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Medtronic plc (MDT - Free Report) is scheduled to report third-quarter fiscal 2022 results on Feb 22, 2022, before the opening bell.
In the last-reported quarter, the company’s earnings exceeded the Zacks Consensus Estimate by 2.33%. Medtronic surpassed estimates in each of the trailing four quarters, the average surprise being 6.74%.
Let’s see how things have shaped up prior to this announcement.
Factors at Play
Medtronic, which witnessed a strong rebound in product demand across its core business segments during the initial months of the fiscal year, observed declining procedure volumes across many of its businesses in the fiscal second quarter due to the emergence of the Delta variant in certain geographies, including the United States. This trend is expected to have continued in the fiscal third quarter as well, severely hit by the spread of the more contagious Omicron variant globally.
Specifically, the company might report low procedure volumes in the fiscal third quarter in markets where Medtronic’s technologies are used in more deferrable procedures. Cardiovascular and Neuroscience arms of the company, which are more elective and have deferrable procedures like cardiac diagnostics, ICDs, Pain Stim and spine, are expected to report dull results this time. Further, businesses that require ICU bed capacity for the procedure, like TAVR, are likely to have been adversely impacted in the third quarter.
Yet, in markets where procedures are less deferrable, like pacing, the company has probably seen growth. Further, through the fiscal third-quarter months, the market continued to return to normalcy in spite of the COVID-19 resurgence on mass vaccine rollout. Accordingly, we expect Medtronic to report year-over-year revenue growth for the fiscal third quarter.
The company’s Cardiac Rhythm Management (CRM) business, which has already shown strong market share gain globally, is expected to have continued with this bullish momentum in the third quarter on robust performance of non-elective procedures using the Micra family of pacemakers, Cobalt and Crome high-power devices, and TYRX Antibacterial Envelopes.
In Neuromodulation, although the products are elective, based on the company’s series of product launches, its gaining market share. Particularly, in the past months, the Intellis with DTM technology and Vanta recharge-free system saw strong market acceptance. These are expected to have positively contributed to the company’s fiscal third-quarter revenues.
In diabetes, MDT might have gained from the continued execution of its turnaround strategy. However, at the same time, the company might have lost shares in the United States as it waited for new product approvals. The company, in August, noted that despite the current challenges in diabetes, it will return to growth in the near term banking on product pipeline and differentiated technologies. Meanwhile, the CMS’ Medicare coverage expansion (announced in December 2021) to include CGMs that integrate with Medtronic insulin pumps should have a partial-quarter contribution to this business revenues in the third quarter.
Further, Medtronic’s hospital customers have been showing signs of recovery. Purchases of capital equipment have gained momentum. The use of Medtronic’s capital equipment like energy consoles, robotics and navigation systems is tied directly to procedures. Hospitals have been prioritizing spending on this type of equipment. This should get reflected in MDT’s soon-to-be-reported quarter’s results.
Overall, the company earlier expected third-quarter organic revenue growth of around 3-4% with a currency headwind of $80 million to $120 million. By segment, Cardiovascular sales are projected to grow in the band of 5% to 6%. Neuroscience is likely to grow 4% to 5%, while Medical Surgical is projected to rise 2% to 3% and Diabetes is expected to be down mid-single digits, all on an organic basis.
Q3 Estimates
The Zacks Consensus Estimate for Medtronic’s fiscal third-quarter total revenues of $7.93 billion suggests a 2% rise from the prior-year reported number. The consensus mark for earnings of $1.37 per share implies a 6.2% increase from the year-ago reported figure.
What Our Quantitative Model Predicts
Per our proven model, a stock needs to have the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to deliver an earnings surprise. But this is not the case here as you will see below.
Earnings ESP: Medtronic has an Earnings ESP of -1.03%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Medtronic currently carries a Zacks Rank #4 (Sell).
Stocks Worth a Look
Here are a few stocks worth considering as these have the right combination of elements to beat on earnings this reporting cycle.
The Joint (JYNT - Free Report) has an Earnings ESP of +6.67% and a Zacks Rank of 2. The Joint is slated to release fourth-quarter 2021 results on Feb 24.
The Joint’s long-term historical earnings growth rate is estimated at 103.1%.
Sight Sciences’ 2022 earnings growth rate is estimated at 52.9%. SGHT’s one-year projected sales growth rate is pegged at 53.52%.
Allscripts Healthcare Solutions (MDRX - Free Report) has an Earnings ESP of +5.38% and is a Zacks #2 Ranked stock.
Allscripts Healthcare is slated to release fourth-quarter 2021 results on Feb 24. Allscripts Healthcare’s long-term earnings growth rate is estimated at 11.1%.
Image: Shutterstock
Medtronic (MDT) to Report Q3 Earnings: What's in Store?
Medtronic plc (MDT - Free Report) is scheduled to report third-quarter fiscal 2022 results on Feb 22, 2022, before the opening bell.
In the last-reported quarter, the company’s earnings exceeded the Zacks Consensus Estimate by 2.33%. Medtronic surpassed estimates in each of the trailing four quarters, the average surprise being 6.74%.
Let’s see how things have shaped up prior to this announcement.
Factors at Play
Medtronic, which witnessed a strong rebound in product demand across its core business segments during the initial months of the fiscal year, observed declining procedure volumes across many of its businesses in the fiscal second quarter due to the emergence of the Delta variant in certain geographies, including the United States. This trend is expected to have continued in the fiscal third quarter as well, severely hit by the spread of the more contagious Omicron variant globally.
Specifically, the company might report low procedure volumes in the fiscal third quarter in markets where Medtronic’s technologies are used in more deferrable procedures. Cardiovascular and Neuroscience arms of the company, which are more elective and have deferrable procedures like cardiac diagnostics, ICDs, Pain Stim and spine, are expected to report dull results this time. Further, businesses that require ICU bed capacity for the procedure, like TAVR, are likely to have been adversely impacted in the third quarter.
Medtronic PLC Price and EPS Surprise
Medtronic PLC price-eps-surprise | Medtronic PLC Quote
Yet, in markets where procedures are less deferrable, like pacing, the company has probably seen growth. Further, through the fiscal third-quarter months, the market continued to return to normalcy in spite of the COVID-19 resurgence on mass vaccine rollout. Accordingly, we expect Medtronic to report year-over-year revenue growth for the fiscal third quarter.
The company’s Cardiac Rhythm Management (CRM) business, which has already shown strong market share gain globally, is expected to have continued with this bullish momentum in the third quarter on robust performance of non-elective procedures using the Micra family of pacemakers, Cobalt and Crome high-power devices, and TYRX Antibacterial Envelopes.
In Neuromodulation, although the products are elective, based on the company’s series of product launches, its gaining market share. Particularly, in the past months, the Intellis with DTM technology and Vanta recharge-free system saw strong market acceptance. These are expected to have positively contributed to the company’s fiscal third-quarter revenues.
In diabetes, MDT might have gained from the continued execution of its turnaround strategy. However, at the same time, the company might have lost shares in the United States as it waited for new product approvals. The company, in August, noted that despite the current challenges in diabetes, it will return to growth in the near term banking on product pipeline and differentiated technologies. Meanwhile, the CMS’ Medicare coverage expansion (announced in December 2021) to include CGMs that integrate with Medtronic insulin pumps should have a partial-quarter contribution to this business revenues in the third quarter.
Further, Medtronic’s hospital customers have been showing signs of recovery. Purchases of capital equipment have gained momentum. The use of Medtronic’s capital equipment like energy consoles, robotics and navigation systems is tied directly to procedures. Hospitals have been prioritizing spending on this type of equipment. This should get reflected in MDT’s soon-to-be-reported quarter’s results.
Overall, the company earlier expected third-quarter organic revenue growth of around 3-4% with a currency headwind of $80 million to $120 million. By segment, Cardiovascular sales are projected to grow in the band of 5% to 6%. Neuroscience is likely to grow 4% to 5%, while Medical Surgical is projected to rise 2% to 3% and Diabetes is expected to be down mid-single digits, all on an organic basis.
Q3 Estimates
The Zacks Consensus Estimate for Medtronic’s fiscal third-quarter total revenues of $7.93 billion suggests a 2% rise from the prior-year reported number. The consensus mark for earnings of $1.37 per share implies a 6.2% increase from the year-ago reported figure.
What Our Quantitative Model Predicts
Per our proven model, a stock needs to have the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to deliver an earnings surprise. But this is not the case here as you will see below.
Earnings ESP: Medtronic has an Earnings ESP of -1.03%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Medtronic currently carries a Zacks Rank #4 (Sell).
Stocks Worth a Look
Here are a few stocks worth considering as these have the right combination of elements to beat on earnings this reporting cycle.
The Joint (JYNT - Free Report) has an Earnings ESP of +6.67% and a Zacks Rank of 2. The Joint is slated to release fourth-quarter 2021 results on Feb 24.
The Joint’s long-term historical earnings growth rate is estimated at 103.1%.
Sight Sciences (SGHT - Free Report) has an Earnings ESP of +1.77% and a Zacks Rank of 2. Sight Sciences is slated to release fourth-quarter 2021 results on Feb 23. You can see the complete list of today’s Zacks #1 Rank stocks here.
Sight Sciences’ 2022 earnings growth rate is estimated at 52.9%. SGHT’s one-year projected sales growth rate is pegged at 53.52%.
Allscripts Healthcare Solutions (MDRX - Free Report) has an Earnings ESP of +5.38% and is a Zacks #2 Ranked stock.
Allscripts Healthcare is slated to release fourth-quarter 2021 results on Feb 24. Allscripts Healthcare’s long-term earnings growth rate is estimated at 11.1%.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.