Here's Why You Should Invest in Medtronic (MDT) Stock Now
Medtronic plc MDT is gaining from expanding its Cardiovascular portfolio. The strong growth prospects within the Neurosurgery portfolio look encouraging. Upbeat fiscal 2024 guidance buoys optimism on the stock. However, forex woes and stiff rivalry do not bode well for MDT.
In the past six months, this Zacks Rank #2 (Buy) stock has increased 3.1% compared with the industry’s 0.1% fall and a 12.9% rise of the S&P 500 composite.
The renowned medical device company has a market capitalization of $112.71 billion. Medtronic has an earnings yield of 6.00% against the industry’s yield of -2.37%. The company’s earnings surpassed estimates in all the trailing four quarters, delivering an average surprise of 1.57%.
Let’s delve deeper.
Tailwinds
Market Share Gain Within Cardiovascular to Continue: Investors are optimistic about Medtronic’s strongly expanding global foothold within the company’s Cardiovascular business (consisting of more than 37% of the company’s total revenues in fiscal 2023). Within Cardiovascular, cardiac rhythm management, one of Medtronic’s largest businesses, continued to build on the company’s category leadership. Within cardiac rhythm management, Medtronic’s pacing business continued outperforming the market, banking on strong global growth of its Micra leadless pacemaker family as it enters new geographies and expands in existing markets.
In May 2023, Medtronic received FDA approval for Micra AV2 and VR2, which extend the battery life by 40% to a projected 16 and 17 years, respectively. Further, ICDs (Implantable cardioverter-defibrillator) within cardiac rhythm management are gaining market share following the latest CE Mark for the Aurora Extravascular ICD. In May, Medtronic released favorable data on the enhanced EV-ICD algorithm and is preparing to launch the Aurora Extravascular ICD in the United States later this year.
Neurosurgery Portfolio Shows Strong Growth Prospects: Medtronic’s Neuroscience portfolio, the Cranial, Spinal technologies business has been registering strong growth in recent quarters, raising investors' optimism on the stock. In the fiscal fourth quarter, the company's acquisition of Intersect ENT within the Specialty Therapies division in the Neuroscience portfolio contributed positively. Within the Cranial & Spinal business, there has been 5% growth with 6% growth in U.S. Core Spine.
The company has launched new spine implants that enhance the overall value of its ecosystem of preoperative planning software, imaging, navigation, and robotic systems as well as powered surgical instruments, all of which are transforming care in spine surgery. These include the ecosystem of Aible-enabling technology and the associated pull-through of Medtronic’s best-in-class spinal implants.
Upbeat Guidance: Medtronic’s upbeat fiscal 2024 guidance instils investors' confidence on the stock. The company’s organic revenue growth is expected in the range of 4-4.5%. Per the FX rate as of the beginning of May, fiscal 2024 revenues would be positively affected by approximately $110 million to $210 million.
The Zacks Consensus Estimate for the company’s fiscal 2024 worldwide revenues is pegged at $32.30 billion.
The full-year adjusted earnings per share is expected in the range of $5.00 to $5.10, including an estimated 6% negative impact from foreign exchange beginning in May. The Zacks Consensus Estimate for the year’s adjusted earnings is $5.18.
Downsides
Exposure to Currency Movement: With Medtronic recording a significant portion of its sales from the international market, it remains highly exposed to currency fluctuations. Unfavorable currency movements have been a significant dampener over the last few quarters, as in the case of other important MedTech players. During the fiscal fourth-quarter earnings call, Medtronic noted that fiscal 2024 adjusted earnings would be negatively impacted by approximately 6% from adverse currency translation.
Image Source: Zacks Investment Research
Competitive Landscape: The presence of a large number of players has made the medical devices market highly competitive. Medtronic earns 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 Trend
Medtronic has been witnessing a negative estimate revision trend for fiscal 2024. The Zacks Consensus Estimate for 2024 earnings per share (EPS) has moved from $5.23 to $5.04 in the past 90 days.
The consensus estimate for the company’s fiscal 2024 revenues is pegged at $32.16 billion. This suggests a 2.9% rise from the year-ago reported number.
Key Picks
Some other top-ranked stocks in the broader medical space are Penumbra, Inc. PEN, Integer Holdings Corporation ITGR and Intuitive Surgical, Inc. ISRG.
Penumbra, carrying a Zacks Rank of 1 (Strong Buy), reported second-quarter 2023 adjusted EPS of 43 cents, beating the Zacks Consensus Estimate by 53.6%. Revenues of $261.5 million outpaced the consensus mark by 3.3%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Penumbra has a estimated 2024 growth rate of 57.9%. PEN’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 94.2%.
Integer Holdings reported second-quarter 2023 adjusted EPS of $1.14, beating the Zacks Consensus Estimate by 15.2%. Revenues of $400 million surpassed the Zacks Consensus Estimate by 8.9%. It currently carries a Zacks Rank #2.
Integer Holdings has a long-term estimated growth rate of 12.1%. ITGR’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 8.4%.
Intuitive Surgical reported second-quarter 2023 adjusted EPS of $1.42, beating the Zacks Consensus Estimate by 7.6%. Revenues of $1.76 billion surpassed the Zacks Consensus Estimate by 1.4%. It currently carries a Zacks Rank #2.
Intuitive Surgical has a long-term estimated growth rate of 14.5%. ISRG’s earnings surpassed estimates in three of the trailing four quarters and missed once, the average surprise being 4.2%.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Medtronic PLC (MDT) : Free Stock Analysis Report
Intuitive Surgical, Inc. (ISRG) : Free Stock Analysis Report
Penumbra, Inc. (PEN) : Free Stock Analysis Report
Integer Holdings Corporation (ITGR) : Free Stock Analysis Report
