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Medtronic (MDT) Q4 Earnings: Can Spine Division Turn Around?

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Of late, Medtronic plc's MDT spine business has been registering soft performance due to a challenging market scenario. Let us see if there is any possibility of a rebound this time around. The company is scheduled to report fourth-quarter and fiscal 2018 results before the opening bell on May 24.

Click here to know how the company’s overall Q4 performance is likely to be.

Spine at a Glance

In the last reported quarter, Medtronic’s spine division was flat year over year. Despite a mid-single-digit growth in BMP (Bone Morphogenetic Protein) at CER, a low-single digit decline in Core Spine hampered overall sales.

However, the company noted that though growth was sluggish, it was in line with the global spine market. Per management, the combination of advanced technologies in imaging, navigation, powered instruments and nerve monitoring has spurred growth in this division. The company has also started to demonstrate positive outcome related to its distribution relationship with Mazor Robotics.

Medtronic PLC Price and EPS Surprise

Medtronic PLC Price and EPS Surprise | Medtronic PLC Quote

Nevertheless, since the beginning of fiscal 2018, Medtronic is suffering from significant pricing pressure in this business, which offset the strong procedural growth. The company believes that this price reduction basically stems from consolidations within hospitals. The company stated that hospitals are getting more sophisticated with their buying patterns and are consolidating their vendor base resulting in price declines.

Medtronic expects this competitive pricing pressure to reduce over the next couple of quarters leading to net procedural growth for the company. However, looking at the company’s outlook, we are uncertain of a near-term recovery. The company earlier noted that spine’s broader Restorative Therapies Group (RTG) segment growth may be marred by the impact of a slower spine market in the soon-to-be reported quarter.

Zacks Rank & Stocks to Consider

Medtronic currently carries a Zacks Rank #3 (Hold).

A few better-ranked stocks in the broader medical sector are Intuitive Surgical ISRG, Illumina, Inc ILMN and Amedisys, Inc. AMED. While Intuitive Surgical and Illumina sport a Zacks Rank #1 (Strong Buy), Amedisys carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Intuitive Surgical has a long-term expected earnings growth rate of 12.1%.

Illumina has a long-term expected earnings growth rate of 20%.

Amedisys has a long-term expected earnings growth rate of 17.5%.

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