Medtronic (MDT) Up 2.9% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Medtronic (MDT). Shares have added about 2.9% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Medtronic due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Medtronic Q2 Earnings, Revenues Top Estimates, View Up
Medtronic reported adjusted earnings per share of $1.25 in second-quarter fiscal 2024 compared with the year-ago quarter’s earnings per share of $1.30. The figure moved down 4% but beat the Zacks Consensus Estimate by 5.9%.
Without certain one-time adjustments — including restructuring and associated costs, amortization and acquisition-related costs, among others — GAAP earnings per share was 68 cents, surging 112.5% from the year-ago quarter’s reported figure.
Total Revenues
Worldwide revenues in the reported quarter grossed $7.98 billion, up 5.3% year over year on a reported basis and 5% on an organic basis. The top line exceeded the Zacks Consensus Estimate by 0.9%.
The company's organic revenue results reflect broad strength across businesses and geographies, benefiting from durable fundamentals.
Segment Details
The company generates revenues from four major segments, namely Cardiovascular Portfolio, Medical Surgical Portfolio, Neuroscience Portfolio and Diabetes.
In the fiscal second quarter, Cardiovascular revenues increased 5.9% at CER to $2.92 billion, with all three divisions reporting organic growth this quarter.
Cardiac Rhythm & Heart Failure sales totaled $1.49 billion, up 5.3% year over year at CER. Revenues from Structural Heart & Aortic were up 8.2% at CER to $819 million. Coronary & Peripheral Vascular revenues were up 5% year over year to $613 million.
In Medical Surgical, worldwide sales totaled $2.14 billion, up 7% year over year at CER. The Surgical & Endoscopy revenue grew 8.5%, while Patient Monitoring & Respiratory Interventions revenues rose 2.5%.
In Neuroscience, worldwide revenues of $2.29 billion were up 4.7% year over year and 4.2% organic, with a high-single-digit organic increase in CST and low-single-digit organic increases in Specialty Therapies and Neuromodulation.
Revenues in the Diabetes group rose 9.7% at CER and 6.7% on organic to $610 million. The company registered mid-teens growth in non-U.S. developed markets on continued MiniMed 780G system adoption and increased CGM attachment rates on the strength of the Guardian 4 sensor.
Margins
Gross margin in the reported quarter contracted 116 basis points (bps) to 65.4% on an 8.9% rise in cost of revenues.
Research and development expenses rose 3.3% year over year at $698 million. Selling, general and administrative expenses rose 2.6% to $2.69 billion.
Adjusted operating margin contracted 13 bps year over year to 23%.
Guidance
Medtronic raised fiscal 2024 guidance.
Fiscal 2024 organic revenue growth is expected to be 4.75% (up from the earlier guidance of 4.5%). The organic revenue growth guidance excludes the impact of foreign currency and revenue related to certain businesses reported as Other. If foreign currency exchange rates as of the beginning of November hold, fiscal 2024 revenue growth on a reported basis would be approximately 2.6%.
The Zacks Consensus Estimate for the company’s fiscal 2024 worldwide revenues is pegged at $32.13 billion.
The full-year adjusted earnings per share is now expected in the range of $5.13-$5.19 (previous guidance was $5.08- $5.16). The Zacks Consensus Estimate for the year’s adjusted earnings is $5.12.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
VGM Scores
At this time, Medtronic has a poor Growth Score of F, however its Momentum Score is doing a lot better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Medtronic has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Medtronic is part of the Zacks Medical - Products industry. Over the past month, Perrigo (PRGO), a stock from the same industry, has gained 1.5%. The company reported its results for the quarter ended September 2023 more than a month ago.
Perrigo reported revenues of $1.12 billion in the last reported quarter, representing a year-over-year change of +2.2%. EPS of $0.64 for the same period compares with $0.56 a year ago.
For the current quarter, Perrigo is expected to post earnings of $0.82 per share, indicating a change of +9.3% from the year-ago quarter. The Zacks Consensus Estimate has changed -0.6% over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #4 (Sell) for Perrigo. Also, the stock has a VGM Score of C.
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