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Here's Why You Should Hold on to Medtronic (MDT) Stock for Now

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·4 min read
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Medtronic plc MDT is well poised for growth in the coming quarters, backed by a slew of product launches and regulatory approvals. Business recovery in the third quarter of fiscal 2021 and improvement in segmental performances buoy optimism as well. However, foreign-exchange fluctuations and a stiff competitive landscape are major downsides.

Over the past year, this Zacks Rank #3 (Hold) stock has gained 25.6% compared with the 26.2% growth of the industry and 53.6% rise of the S&P 500.

This renowned medical technology, services and solutions provider has a market capitalization of $159.33 billion. The company projects 7.6% growth for the next five years and expects to witness continued improvements in its business. Medtronic surpassed the Zacks Consensus Estimate in three of the trailing four quarters and missed the same in one, the average surprise being 59.12%.

Let’s delve deeper.

Regulatory Approvals: We are optimistic about the slew of regulatory approvals received by Medtronic. The company, in March, received the FDA’s approval for its Harmony Transcatheter Pulmonary Valve — the first minimally invasive therapy created for the treatment of patients with a specific type of congenital heart defect of the right ventricle. The same month, the company received the CE Mark for the SenSight directional lead system for Deep Brain Stimulation therapy as treatment of symptoms associated with movement disorders and epilepsy.

Again in March, Medtronic received revised commercial labeling approval from the FDA for its Intellis Platform that works with Differential Target Multiplexed Spinal Cord Stimulation programming. In February, the company received the FDA’s approval for expanded MRI labeling of its InterStim II and InterStim Micro sacral neuromodulation systems that use SureScan MRI leads.

Product Launches: We are upbeat about the slew of product launches by Medtronic over the past few months. The company, in December 2020, announced the U.S. commercial launch of the Carpediem Cardio-Renal Pediatric Dialysis Emergency Machine following the FDA’s marketing authorization granted earlier in the year. Medtronic announced the launch of InPen integrated with real-time Guardian Connect continuous glucose monitoring data in November 2020.

Medtronic announced the U.S. launch of Adaptix Interbody System in October 2020 post its FDA approval in August 2020. Notably, Adaptix is the first navigated titanium implant with Titan nanoLOCK Surface Technology, a proprietary combination of surface textures on the macro, micro and nano levels.

Strong Q3 Results: Medtronic’s better-than-expected earnings in third-quarter fiscal 2021 buoy optimism. The company reported sequential improvement in both earnings and revenues. Respiratory, Gastrointestinal & Renal, as well as Specialty Therapies, Neuromodulation and Diabetes Group registered year-over-year growth on an organic basis during the fiscal third quarter.

Downsides

Exposure to Currency Movement: We are concerned about Medtronic’s exposure to currency fluctuations as it rakes in a significant portion of its sales from international markets. Unfavorable currency movements have been a major dampener over the last few quarters. Fiscal 2021 revenues are expected to get adversely impacted by currency translation of more than 20 cents.

Competitive Landscape: The presence of a large number of players has made the medical devices market highly competitive. The company faces intense competition from players such as Boston Scientific Corporation BSX in the cardiovascular business.

Estimate Trend

Medtronic has been witnessing an upward estimate revision trend for 2021. Over the past 90 days, the Zacks Consensus Estimate for its earnings per share has moved 3.6% north to $4.35.

The Zacks Consensus Estimate for fourth-quarter fiscal 2021 revenues is pegged at $8.15 billion, suggesting 35.9% rise from the year-ago reported number.

Key Picks

Some better-ranked stocks from the broader medical space are Align Technology, Inc. ALGN and IDEXX Laboratories, Inc. IDXX.

Align Technology’s long-term earnings growth rate is estimated at 19.8%. The company presently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

IDEXX’s long-term earnings growth rate is estimated at 15.8%. It currently carries a Zacks Rank #2 (Buy).

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Medtronic PLC (MDT) : Free Stock Analysis Report

Boston Scientific Corporation (BSX) : Free Stock Analysis Report

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IDEXX Laboratories, Inc. (IDXX) : Free Stock Analysis Report

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