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Here's Why You Should Retain Medtronic (MDT) Stock for Now
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Medtronic plc (MDT - Free Report) is well poised for growth in coming quarters, backed by its expansion into the global market to address the unmet demand for advanced medical technologies. A stable liquidity position is an added plus. However, forex woes and stiff rivalry do not bode well for MDT.
In the past year, this Zacks Rank #3 (Hold) stock has gained 5.3% compared with the industry’s 3.6% rise and a 25.3% rise of the S&P 500 composite.
The renowned medical device company has a market capitalization of $109.54 billion. The company’s earnings surpassed estimates in all the trailing four quarters, delivering an average surprise of 4.46%.
Image Source: Zacks Investment Research
Let’s delve deeper.
Tailwinds
International Expansion Robust: Medtronic, in the fiscal 2023, generated nearly 48% of its revenues from the rest of the world. The company is more focused on expansion in emerging markets to address the massively unmet and untapped demand for advanced medical technologies. In the fiscal second quarter, Western Europe grew in the high single digits with strength across many cardiovascular businesses, diabetes, neurovascular and pelvic health. Japan grew mid-single-digits driven by strong results in many cardiovascular businesses and surgical and neurovascular.
For the Hugo surgical robot, the company is scaling manufacturing production, expanding regulatory approvals and ramping up installations to see continued progress internationally. Within Structural Heart, Medtronic is gaining from the recent launch of Evolut FX in Japan.
Neurosurgery Portfolio Shows Strong Growth Prospects: Within Medtronic’s Neuroscience portfolio, the Cranial, Spinal technologies business has been registering strong growth in recent quarters. In the fiscal second quarter, this segment benefited from increased sales of Spine & Biologics products in the United States based on the continued adoption of the Aible spinal ecosystem. According to Medtronic, digitization is transforming the competitive landscape in the spine, and with Aible, the company is leading the way. It is currently the only solution with integrated AI-based surgical planning with unit adaptive spine intelligence.
Stable Liquidity Position: With total debt (including the current portion) of $25.08 billion as of Oct 27, 2023, Medtronic apparently looks quite burdened by debt. The company’s cash and cash equivalents were $1.31 billion at the end of the second quarter of fiscal 2024. Although the second quarter’s total debt was much higher than the corresponding cash and cash equivalent level, the short-term payable debt of $1.33 billion remains marginally in line with the short-term cash level. The company’s times-interest-earned ratio of 9 compares with 9.9 at the end of the fiscal first quarter.
Downsides
Exposure to Currency Movement: With Medtronic recording a significant portion of its sales from the international market, it is highly exposed to currency fluctuations. Unfavorable currency movements have been a major dampener over the last few quarters, as in the case of other important MedTech players, too. Medtronic expects its second-quarter fiscal 2024 adjusted earnings to be affected by nearly 6% from adverse currency translation.
Competitive Landscape: The presence of a large number of players has made the medical devices market highly competitive. Medtronic generates the majority of revenues from CRDM, Spinal and Cardio Vascular segments. The company faces intense competition in the CRDM segment from players such as Boston Scientific Corporation. Players such as Johnson & Johnson, Stryker Corporation, Zimmer and NuVasive have intensified competition, particularly in the Spinal segment.
Estimate Trends
Medtronic has been witnessing a positive estimate revision trend for the fiscal 2024. The Zacks Consensus Estimate for 2024 earnings per share (EPS) has moved from $5.12 to $5.16 in the past 90 days.
The consensus estimate for the company’s fiscal 2024 revenues is pegged at $32.07 billion. The metric suggests a 2.7% rise from the year-ago reported number.
Haemonetics’ shares have increased 11.6% in the past year. Earnings estimates for Haemonetics have increased from $3.82 to $3.86 in 2023 and $4.07 to $4.11 in 2024 in the past 30 days.
HAE’s earnings beat estimates in each of the trailing four quarters, delivering an average surprise of 16.1%. In the last reported quarter, it posted an earnings surprise of 5.3%.
Estimates for Insulet’s 2023 earnings per share have increased from $1.61 to $1.90 in the past 30 days.
PODD’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 105.1%. In the last reported quarter, it delivered an average earnings surprise of 77.4%.
DaVita has an estimated long-term growth rate of 17.3%. DVA’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 36.6%. You can see the complete list of today’s Zacks #1 Rank stocks here.
DaVita’s shares have gained 38.2% compared with the industry’s 9.4% rise in the past year.
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Here's Why You Should Retain Medtronic (MDT) Stock for Now
Medtronic plc (MDT - Free Report) is well poised for growth in coming quarters, backed by its expansion into the global market to address the unmet demand for advanced medical technologies. A stable liquidity position is an added plus. However, forex woes and stiff rivalry do not bode well for MDT.
In the past year, this Zacks Rank #3 (Hold) stock has gained 5.3% compared with the industry’s 3.6% rise and a 25.3% rise of the S&P 500 composite.
The renowned medical device company has a market capitalization of $109.54 billion. The company’s earnings surpassed estimates in all the trailing four quarters, delivering an average surprise of 4.46%.
Let’s delve deeper.
Tailwinds
International Expansion Robust: Medtronic, in the fiscal 2023, generated nearly 48% of its revenues from the rest of the world. The company is more focused on expansion in emerging markets to address the massively unmet and untapped demand for advanced medical technologies. In the fiscal second quarter, Western Europe grew in the high single digits with strength across many cardiovascular businesses, diabetes, neurovascular and pelvic health. Japan grew mid-single-digits driven by strong results in many cardiovascular businesses and surgical and neurovascular.
For the Hugo surgical robot, the company is scaling manufacturing production, expanding regulatory approvals and ramping up installations to see continued progress internationally. Within Structural Heart, Medtronic is gaining from the recent launch of Evolut FX in Japan.
Neurosurgery Portfolio Shows Strong Growth Prospects: Within Medtronic’s Neuroscience portfolio, the Cranial, Spinal technologies business has been registering strong growth in recent quarters. In the fiscal second quarter, this segment benefited from increased sales of Spine & Biologics products in the United States based on the continued adoption of the Aible spinal ecosystem. According to Medtronic, digitization is transforming the competitive landscape in the spine, and with Aible, the company is leading the way. It is currently the only solution with integrated AI-based surgical planning with unit adaptive spine intelligence.
Stable Liquidity Position: With total debt (including the current portion) of $25.08 billion as of Oct 27, 2023, Medtronic apparently looks quite burdened by debt. The company’s cash and cash equivalents were $1.31 billion at the end of the second quarter of fiscal 2024. Although the second quarter’s total debt was much higher than the corresponding cash and cash equivalent level, the short-term payable debt of $1.33 billion remains marginally in line with the short-term cash level. The company’s times-interest-earned ratio of 9 compares with 9.9 at the end of the fiscal first quarter.
Downsides
Exposure to Currency Movement: With Medtronic recording a significant portion of its sales from the international market, it is highly exposed to currency fluctuations. Unfavorable currency movements have been a major dampener over the last few quarters, as in the case of other important MedTech players, too. Medtronic expects its second-quarter fiscal 2024 adjusted earnings to be affected by nearly 6% from adverse currency translation.
Competitive Landscape: The presence of a large number of players has made the medical devices market highly competitive. Medtronic generates the majority of revenues from CRDM, Spinal and Cardio Vascular segments. The company faces intense competition in the CRDM segment from players such as Boston Scientific Corporation. Players such as Johnson & Johnson, Stryker Corporation, Zimmer and NuVasive have intensified competition, particularly in the Spinal segment.
Estimate Trends
Medtronic has been witnessing a positive estimate revision trend for the fiscal 2024. The Zacks Consensus Estimate for 2024 earnings per share (EPS) has moved from $5.12 to $5.16 in the past 90 days.
The consensus estimate for the company’s fiscal 2024 revenues is pegged at $32.07 billion. The metric suggests a 2.7% rise from the year-ago reported number.
Key Picks
Some better-ranked stocks in the broader medical space are Haemonetics (HAE - Free Report) , Insulet (PODD - Free Report) and DaVita, Inc. (DVA - Free Report) . While Haemonetics carry a Zacks Rank #2 (Buy), Insulet and DaVita sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Haemonetics’ shares have increased 11.6% in the past year. Earnings estimates for Haemonetics have increased from $3.82 to $3.86 in 2023 and $4.07 to $4.11 in 2024 in the past 30 days.
HAE’s earnings beat estimates in each of the trailing four quarters, delivering an average surprise of 16.1%. In the last reported quarter, it posted an earnings surprise of 5.3%.
Estimates for Insulet’s 2023 earnings per share have increased from $1.61 to $1.90 in the past 30 days.
PODD’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 105.1%. In the last reported quarter, it delivered an average earnings surprise of 77.4%.
DaVita has an estimated long-term growth rate of 17.3%. DVA’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 36.6%. You can see the complete list of today’s Zacks #1 Rank stocks here.
DaVita’s shares have gained 38.2% compared with the industry’s 9.4% rise in the past year.