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Medtronic (MDT) Businesses Rebound Amid Raging Pandemic

Medtronic (MDT) is registering strong organic growth in the Cardiovascular, Neuroscience and Diabetes segments on product launches.

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This story originally appeared on Zacks

The increase in the adoption of Medtronic plc's MDT globally-accepted advanced therapies is encouraging. However, unfavorable currency movement and global economic uncertainties continue to affect Medtronic. The stock currently carries a Zacks Rank #3 (Hold).

- Zacks

Medtronic’s second-quarter fiscal 2022 earnings were ahead of the Zacks Consensus Estimate. While the company faced the COVID-19 resurgence headwind in the United States, the performance of its international markets was robust. Medtronic delivered 6% revenue growth outside the United States, including mid-teens growth in emerging markets. Emerging market growth was up 9% from the pre-pandemic levels in the second quarter of fiscal 2020.

Despite a challenging market backdrop, the overall results reflected solid execution around new product launches and strong underlying bottom-line growth. In the quarter, the company registered organic growth in the Cardiovascular, Neuroscience and Diabetes segments. Within Cardiovascular, Cardiac Rhythm & Heart Failure (CRHF), Coronary & Peripheral Vascular (CPV) and Structural Heart & Aortic (SHA) each registered organic growth. In Medical Surgical, the Surgical Innovations (SI) business witnessed mid-single-digit growth in Advanced Surgical Instruments, driven by the continued adoption of the company's LigaSure, Sonicision, and Tri-Staple technologies.

Hernia & Wound Management increased in the high-single digits, with strength in sutures. Further, excluding the impact of ventilator sales declines, RGR revenues increased 4% organically, banking on low-double-digit growth in Patient Monitoring with mid-teens growth in the company's Nellcor pulse oximetry products, driven in part by increased monitoring of COVID hospitalized patients. Gastrointestinal revenues increased in the mid-single digits, with low double-digit growth in Chronic & Colorectal on the strength of PillCam system sales. Renal Care Solutions increased in mid-single digits with low-40s growth in acute therapies driven by increased demand for adult and pediatric continuous renal replacement therapy.

Within Neuroscience, Specialty Therapies grew with high-teens growth in Hemorrhagic Stroke products. Neuromodulation registered strong growth on mid-20s growth in Brain Modulation. Within Neurosurgery the company registered sales growth in StealthStation navigation systems, O-arm imaging systems, and Midas Rex.

In Diabetes, durable insulin pumps grew in the low-20s, including high-teens growth in the United States and low-20s growth in international markets on the continued launch of the MiniMed 770G and MiniMed 780G systems, respectively. Sales of continuous glucose monitoring (CGM) products increased in low-single digits.

The quarter’s gross and operating margins showed improvements on a year-over-year basis.

On the flip side, over the past year, Medtronic has underperformed the industry. As per the last share price movement, the stock has dropped 12.1% compared with the industry’s 6.2% dip.

Medtronic’s second-quarter fiscal 2022 revenues missed the Zacks Consensus Estimate. The sluggish top-line results reflected the unfavorable market impact of COVID-19 and health system staffing shortages on medical device procedure volumes, primarily in the United States. Specifically, procedure volumes were lighter than expected in markets, where the company’s products are used in the more deferrable procedures. For example, the company’s spine business was soft and procedures that require ICU bed capacity like TAVR were down in fiscal Q2.

Considering the greater-than-expected market impact of the pandemic and healthcare system staffing challenges in the fiscal second quarter, which is expected to continue into the second half of fiscal 2022, Medtronic now expects fiscal 2022 organic revenue growth of 7-8%, down from the prior expectation of approximately 9%.

While Medtronic expects the impact of the COVID resurgence to diminish, the effect of the ongoing pandemic on businesses in emerging markets remains challenging to predict. This is because, in regions like the United States, Europe and some parts of Asia, the virus is raging.

Key Picks

A few better-ranked stocks from the broader medical space are Thermo Fisher Scientific Inc. TMOLaboratory Corporation of America Holdings LH, or LabCorp and Medpace Holdings, Inc. MEDP.

Thermo Fisher, currently carrying a Zacks Rank #2 (Buy), reported third-quarter 2021 adjusted earnings per share (EPS) of $5.76, which surpassed the Zacks Consensus Estimate by 23.3%. Revenues of $9.33 billion outpaced the Zacks Consensus Estimate by 12%.

Thermo Fisher has an estimated long-term growth rate of 14%. TMO surpassed estimates in the trailing four quarters, the average surprise being 9.02%.

LabCorp, carrying a Zacks Rank #1 (Strong Buy), reported third-quarter 2021 adjusted EPS of $6.82, which surpassed the Zacks Consensus Estimate by 42.9%. Revenues of $4.06 billion outpaced the Zacks Consensus Estimate by 13.4%.

LabCorp has an estimated long-term growth rate of 10.6%. LH surpassed estimates in the trailing four quarters, the average surprise being 25.7%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Medpace reported third-quarter 2021 adjusted EPS of $1.29, surpassing the Zacks Consensus Estimate by 20.6%. Revenues of $295.57 million beat the Zacks Consensus Estimate by 1.2%.

Medpace has an estimated long-term growth rate of 16.4%. MEDP surpassed estimates in the trailing four quarters, the average surprise being 11.9%. It currently carries a Zacks Rank #2.





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