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Medtronic Analysts Applaud Q1 Beat-And-Raise

Shanthi Rexaline

Large-cap medtech company Medtronic PLC (NYSE: MDT) reported strong first-quarter results Tuesday, sending its shares to a 52-week high.

The Analysts

Wells Fargo Securities analyst Larry Biegelsen maintained an Outperform rating on Medtronic and $120 price target.

BMO Capital Markets analyst Joanne Wuensch reiterated an Outperform rating and upped the price target from $107 to $118.

Raymond James analyst Jayson Bedford maintained an Outperform rating and lifted the price target from $105 to $118.

Wells Fargo Sees Encouraging Start To 2020 

Medtronic's first-quarter sales exceeded expectations in each of four key segments, with stable to accelerating growth in the cardiac and vascular group, minimally invasive therapies group and diabetes, Wells Fargo's Biegelsen said in a Tuesday note.

Non-GAAP EPS of $1.26 beat the consensus as well as Wells Fargo's estimate, the analyst said. 

Looking ahead, the company maintained its 2020 sales growth outlook of about 4%, with the second quarter coming in-line with the first and growth accelerating thereafter to 4%-plus, he said. 

The anticipated acceleration is driven by the timing of new product launches and year-over-year comp dynamics, Biegelsen said. 

Citing the first-quarter beat and lower interest expenses following its debt refinancing, Medtronic raised its 2020 EPS guidance by 10 cents to $5.54-$5.60, according to Wells Fargo. 

The sell-side firm expects acceleration in top-line growth thanks to confidence in the pipeline and upcoming product launches, including the surgical robotic platform.

Wells Fargo sees the results as an encouraging start to 2020, Biegelsen said. 

BMO's Key Takeaways From Solid Beat-And-Raise Quarter

Medtronic delivered a solid beat-and-raise quarter despite a difficult year-over-year comp and before many pipeline products began to gain traction, BMO's Wuensch said in a Tuesday note. 

View more earnings on MDT

The analyst named five key takeaways from the earnings report:

  • The Spine franchise benefited from Mazor pull-through.
  • A slow recovery as implied by worldwide DCB sales.
  • Mid-teens sales growth for TAVR, with a 50% expansion in market opportunity expected by Medtronic.
  • Weakness in U.S. sales for the diabetes franchise, arising from competitive headwinds offset by ex-U.S. sales. 
  • A robust product pipeline with upcoming launches of a surgical robot, the Micra AV leadless pacemaker, Reveal LINQ 2.0 cardiac monitoring system and Evolus Pro Plus TAVR.

BMO also pointed to the 90-basis point year-over-year expansion in operating margins due to the benefits from cost initiatives enacted a year ago.

Raymond James: There's Not Much To Dislike

Medtronic's revenue upside was broad based and benefited from a lower-than-expected forex impact and fewer heawinds from the sterilization dynamic, Raymond James' Bedford said in a Tuesday note. 

The bottom-line upside was also helped by a milder forex impact, the analyst said. 

The results give RayJay additional confidence in its bullish thesis, he said, adding that there isn't much to dislike about the stock.

RayJay expects revenue growth to accelerate in the fiscal year 2020 second quarter and into fiscal 2021 as enthusiasm around various new product cycles increases.

The stock still trades at a discount to peers, Bedford said.

The Price Action

After advancing 2.6% Tuesday, Medtronic shares were trading up 0.83% at $107.80 at the time of publication Wednesday. 

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Photo courtesy of Medtronic. 

Latest Ratings for MDT

Date Firm Action From To
Aug 2019 Maintains Hold
Aug 2019 Maintains Outperform
Aug 2019 Maintains Buy

View More Analyst Ratings for MDT
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