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Medtronic (MDT) to Report Q2 Earnings: What's in Store?

Zacks Equity Research

Medtronic plc MDT is scheduled to report second-quarter fiscal 2020 results on Nov 19, before the opening bell.

In the last reported quarter, the company’s earnings beat the Zacks Consensus Estimate by 6.8%. Moreover, the bottom line outpaced estimates in the trailing four quarters, the average being 5.8%.

Let’s see how things are shaping up prior to this announcement.

Key Catalysts

We are upbeat about Medtronic’s successful execution of growth strategies, such as therapy innovation, globalization and increase in economic value. Combined with the demographics of an aging population, these positives opened up wide opportunities for the company, which might get reflected in the upcoming quarterly results.

The therapy innovation space has been seeing multiple developments. Under Cardiac and Vascular Group (CVG), new therapies are helping the company gain traction from the rapidly-growing MedTech market for left ventricular assist device, transcatheter aortic valve replacement, drug-coated balloons, atrial fibrillation ablation and insertable diagnostics.

Medtronic PLC Price and EPS Surprise

Medtronic PLC Price and EPS Surprise

Medtronic PLC price-eps-surprise | Medtronic PLC Quote

There has been a gradually stabilizing trend in the global cardiac rhythm and heart failure (CRHF) market. In the fiscal second quarter, the company is expected to have registered strong growth in its ICD (implantable cardioverter defibrillator) and CRT (cardiac resynchronization therapy) product lines within the scope of CRHF, banking on product launch and creation of meaningful markets.

Strong demand for the company's Micra transcatheter pacing system, Valiant Navion thoracic stent graft, VenaSeal Closure System, TYRX absorbable antibacterial envelope, Reveal LINQ product lines and a robust performance in TAVR franchise are steadily driving Medtronic’s revenues within this niche. Further, following CMS’ final TAVR NCD memo published in June, many new TAVR centers in the United States are entering into partnerships with Medtronic. This is also expected to have positively contributed to Medtronic’s top line in the fiscal second quarter.

However, in the to-be-reported quarter, this growth is likely to have been offset by weakened sales of left ventricular assist device (LVAD) as a result of market share loss (due to the regulatory approval of Abbott’s competitive product HeartMate 3) and certain unfavorable changes in the heart transplant guideline. This apart, sales might have taken a hit as the company is in its CRM replacement cycle.

Overall, the Zacks Consensus Estimate for CVG revenues in the fiscal second quarter is pegged at $2.87 billion, indicating a 0.4% dip from the year-ago reported number.

Within Restorative Therapies Group (RTG), the company is again projected to have seen solid progress, particularly in Brain & Pain divisions despite challenges in the Spine market.

Medtronic’s integrated robotics and navigation platform Mazor X Stealth is expected to have driven growth in Neurosurgery business along with creating demand for the core spine implants.

The Zacks Consensus Estimate for RTG revenues in the fiscal second quarter stands at $2.07 billion, implying a 3% improvement from the last reported figure.

Within Minimally Invasive Therapies Group (MITG), the company is once again expected to have delivered higher revenues, banking on sturdy sales of Advanced Stapling and Advanced Energy products. Innovations within its Tri-Staple and LigaSure franchises including new EEA circular stapler with Tri-Staple technology and Ligasure Exact dissector might have aided growth.

The Zacks Consensus Estimate for MITG revenues in the fiscal second quarter is pegged at $2.14 billion, suggesting a 1.8% slip from the last reported quarter.

Within Diabetes, Medtronic is likely to have sustained U.S. patient demand for its MiniMed 670G hybrid closed loop system in the fiscal second quarter. Outside the United States, the company is witnessing buoyant demand for 640G system. It is continuing with the launch of MiniMed 670G in several international markets, which in turn, is expected to have consistently boosted its international diabetes revenues.

The Zacks Consensus Estimate for Diabetes revenues is pegged at $596 million, indicating a 2.2% increase from the prior-year reported figure.

Here’s What the Quantitative Model Predicts

Per our proven model, a stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to deliver a positive earnings surprise. This is not the case here as you will see below.

Earnings ESP: Medtronic has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Medtronic carries a Zacks Rank #3. 

Stocks Worth a Look

Here are a few medical stocks worth considering with the right combination of elements to beat on earnings in the to-be-reported quarter.

ACADIA Pharmaceuticals Inc. ACAD has an Earnings ESP of +0.26% and a Zacks Rank #2.

Exact Sciences Corporation EXAS has an Earnings ESP of +1.27% and a Zacks Rank of 2.

Jazz Pharmaceuticals plc JAZZ has an Earnings ESP of +4.48% and a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.

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