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Will RTG Again Bolster Medtronic's (MDT) Earnings in Q4?

Zacks Equity Research

Medtronic plc’s MDT Restorative Therapies Group (“RTG”) has been on a strong growth trajectory of late, courtesy of a solid contribution from majority of the sub-segments.

We expect this uptick to get reflected in fourth-quarter fiscal 2019 results, which are scheduled to be released on May 23, before the opening bell.

Click here to know how the company’s overall performance in the fiscal fourth quarter is expected to be.

RTG in the Spotlight

RTG consists of Spine, Brain Therapies, Specialty Therapies and Pain Therapies divisions.

The company is encouraged by a robust and consistent constant currency growth in RTG business over the last few quarters. This has been driven by a sustained momentum in the Brain Therapies division, banking on strong growth in both Neurovascular and Neurosurgery.

Medtronic PLC Price and EPS Surprise

Medtronic PLC Price and EPS Surprise

Medtronic PLC price-eps-surprise | Medtronic PLC Quote

Within Neurovascular, we expect to see an uptick across Medtronic’s stroke franchise with growth in stent retrievers, flow diverters, neuro access and embolic products. Within Neurosurgery, the company’s capital equipment performance should remain strong, boosted by a sturdy performance of StealthStation navigation, O-arm imaging, Mazor Robotics and Midas Rex powered surgical systems.

In this regard, earlier in 2019, the company launched the Mazor X Stealth Edition robotics guidance platform and has already received a positive feedback on the same. This should add to the company’s Neurosurgery business top line in the yet-to-be-reported quarter.

Within Pain Therapies, Medtronic is currently witnessing growth in Pain Stimulation, Targeted Drug Delivery, Interventional Pain.  This apart, a solid uptake of Intellis platform for spinal-cord stimulation, Evolve workflow algorithm and Snapshot reporting are driving the company’s revenue stream.

Within Spine, however, the last reported quarter witnessed sluggish sales on account of declining sales of capital equipment used in spine surgery.

We believe, in the fiscal fourth quarter, strength in the Pain and Brain Therapies segments will offset any adverse impact from the weakening spine market.

Medtronic currently expects 5.5-6% revenue growth in RTG business during fiscal 2019. For the fiscal fourth quarter, management anticipates 3.5-4% revenue rise from RTG business.

The Zacks Consensus Estimate for RTG revenues of $2.14 billion indicates an increase of 5.8% from the year-ago reported quarter.

Zacks Rank & Key Picks

Medtronic currently carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the broader medical space are Masimo Corporation MASI, CONMED CNMD and DENTSPLY SIRONA XRAY, each currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Masimo’s long-term earnings growth rate is projected at 16.1%

CONMED’s long-term earnings growth rate is expected at 13.3%.

DENTSPLY SIRONA’s long-term earnings growth rate is predicted at 11.5%.

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