Medtronic (MDT) Q1 Earnings Beat Estimates, Margins Up (Revised)
Medtronic plc MDT reported adjusted earnings per share (EPS) of $1.20 for first-quarter fiscal 2024 compared with the year-ago quarter’s EPS of $1.13. The figure moved up 1.6% and beat the Zacks Consensus Estimate by 8.1%.
Without certain one-time adjustments — including restructuring and associated costs, amortization, acquisition-related costs, among others— GAAP EPS was 59 cents, down 15.7% from the year-ago quarter’s reported figure.
Total Revenues
Worldwide revenues in the reported quarter grossed $7.70 billion, up 4.5% year over year on a reported basis and 6% on an organic basis. The top line exceeded the Zacks Consensus Estimate by 1.7%.
The company's organic revenue results reflect broad strength across businesses and geographies, driven by execution, innovation, and improved underlying fundamentals.
Segment Details
The company generates revenues from four major segments, namely Cardiovascular Portfolio, Medical Surgical Portfolio, Neuroscience Portfolio and Diabetes.
In the fiscal first quarter, Cardiovascular revenues increased 5.5% at CER to $2.85 billion, with all three divisions reporting organic growth this quarter. This compares with our model projection of $2.76 billion for Q1.
Cardiac Rhythm & Heart Failure sales totaled $1.45 billion, up 4.7% year over year at CER. Revenues from Structural Heart & Aortic were up 9.9% at CER to $814 million. Coronary & Peripheral Vascular revenues were up 1.7% year over year to $589 million.
In Medical Surgical, worldwide sales totaled $2.04 billion, up 5.5% year over year at CER. The Surgical & Endoscopy revenue grew 6.3% while Patient Monitoring & Respiratory Interventions revenues rose 2.9%. This compares with our model projection of $2.12 billion for Q1.
Medtronic PLC Price, Consensus and EPS Surprise
Medtronic PLC price-consensus-eps-surprise-chart | Medtronic PLC Quote
In Neuroscience, worldwide revenues of $2.22 billion were up 4.9% year over year and 5.6% organic, with mid-single digit organic increases in CST, Specialty Therapies, and Neuromodulation. This compares with our model projection of $2.15 billion for Q1.
Revenues in the Diabetes group rose 6.8% at CER and 6.3% on organic to $578 million. The company registered high-teens growth in Non-U.S. Developed Markets accelerated from recent quarters on increased MiniMed 780G system adoption, increased CGM attachment rates on the strength of the Guardian 4 sensor, and geographic expansion. This compares with our model projection of $540.2 million for Q1.
Margins
Gross margin in the reported quarter expanded 1 basis points (bps) to 65.0% on a 4.5% rise in cost of revenues.
Research and development expenses were down 3.5% year over year at $668 million. Selling, general and administrative expenses rose 1.8% to $2.61 billion.
Adjusted operating margin expanded 163 bps year over year to 23.3%
Guidance
Medtronic raised fiscal 2024 guidance.
Fiscal 2024 organic revenue growth is expected to be 4.5% (up from the earlier guided range of 4-4.5%). 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 August hold, FY24 revenue growth on a reported basis would be approximately 2.75%.
The Zacks Consensus Estimate for the company’s fiscal 2024 worldwide revenues is pegged at $32.16 billion.
The full-year adjusted EPS is expected in the range of $5.08 to $5.16 (previous guided range was $5.00- $5.10). The Zacks Consensus Estimate for the year’s adjusted earnings is $5.05.
Our Take
Medtronic recorded earnings and revenue beat in the fiscal first quarter. The company's organic revenue results reflect broad strength across businesses and geographies, driven by execution, innovation, and improved underlying fundamentals. During the quarter, the company received CE Mark approval for the company's next-generation Inceptiv spinal cord stimulator with closed-loop sensing. Within Neiuroscience, Specialty Therapies results were driven by high-teens growth in ENT aided by supply improvement, low-single digit growth in Neurovascular, and low-single digit declines in Pelvic Health. Raised fiscal 2024 guidance looks encouraging. However, macroeconomic headwinds related to persistent inflation and unfavorable foreign currency movements continue to challenge the company’s earnings performance.
Zacks Rank & Other Key Picks
Medtronic currently carries a Zacks Rank #2 (Buy).
Some other top-ranked stocks in the broader medical space are Penumbra, Inc. PEN, Integer Holdings Corporation ITGR and Patterson Companies, Inc. PDCO.
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 2024 estimated growth rate of 57.9%. PEN’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 94.2%.
Patterson Companies has an Earnings ESP of +5.66% and a Zacks Rank of 2. PDCO has an estimated long-term growth rate of 9.2%.
Patterson Companies’ earnings surpassed estimates in three of the trailing four quarters and missed once, with the average surprise being 4.5%.
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%.
(We are reissuing this article to correct a mistake. The original article, issued on August 22, 2023, should no longer be relied upon.)
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