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Press Release

Medtronic Earnings Face FX Headwinds, But Cardiac Trends Good

Posted on: 25 Aug 16

Medical-device giant Medtronic (MDT) is due to report its fiscal Q1 earnings early Thursday, after reports from its peers indicated solid growth for the sector.

Analysts expect single-digit revenue and earnings growth on a constant-currency basis, but the foreign-exchange headwinds have them seeing an overall sales decline of 1.4% to $7.17 billion, with EPS dipping a penny to $1.01.

RBC Capital Markets analyst Glenn Novarro wrote Monday that recent Q2 reports from cardiac-device companies Boston Scientific (BSX), Edwards Lifesciences (EW) and St. Jude Medical (STJ) signaled strength in the market that could drive an upside surprise from Medtronic's Cardiac & Vascular group. (See IBD coverage of Edwards' Q2 earnings and Boston Scientific's Q2 earnings.)

"Margin concerns will likely prove overblown," Novarro added in his preview note. "Gross margins, adjusted for foreign-exchange rates, are tracking the 70% level. SG&A (sales, general & administrative) expenses, similarly adjusted, were $150 million lower year over year in fiscal Q4, benefiting from the ongoing integration of Medtronic and Covidien."

Medtronic acquired the surgical-products leader Covidien last year for $43 billion.

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Medtronic closed another acquisition Tuesday, paying $1.1 billion for HeartWare, a maker of ventricular assist devices for heart-failure patients. Medtronic stock also got a buy rating Tuesday when Citi initiated coverage. The stock has been forming a flat base since it hit a lifetime high of 89.27 on July 15.

Medtronic stock rose a fraction Tuesday and looked set to open trading in the stock market today at 87.80, near its all-time high of 89.27 touched last month, and near an 89.37 buy point out of a flat base. Medtronic stock is up 14% in 2016 so far.

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Editor's Details

Mike Wood

Last updated on: 25/08/2016

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