On Mar 13, 2014, we issued an updated research report on
). While we are, to some extent, relieved with signs of stability
following improvement in Medtronic's core implantable
cardioverter defibrillator (ICD), challenges still loom large in
the spine market which remains sluggish. The stock currently
carries a Zacks Rank #3 (Hold).
Medtronic posted a mixed third-quarter fiscal 2014 with
adjusted earnings per share of 91 cents, down 2% year over year
and in line with the Zacks Consensus Estimate. Revenues came in
at $4.163 billion, up 4% at CER, closely beating the Zacks
Consensus Estimate of $4.155 billion.
We are encouraged by the improvement observed in Medtronic's
core Cardiac Rhythm Disease Management (CRDM) segment. In the
third quarter, ICD revenue growth was 1% at CER compared to low
single-digit market growth rate (both in the global and U.S. ICD
markets). With 50 basis points (bps) gain in international share
and loss of 50 bps in U.S. share, global ICD share remained
stable during the quarter.
The company also witnessed robust growth in the transcatheter
valve business in the international market on the back of
CoreValve. In Jan 2014, Medtronic received the
earlier-than-expected FDA approval for its self-expanding
transcatheter, CoreValve System for three different access routes
-- transfemoral, subclavian, and direct aortic -- in extreme risk
patients. We expect this to further strengthen the company's
business in this niche by providing greater competitive
Medtronic is resorting to all possible means to boost growth.
This includes penetration into the emerging markets, expansion of
portfolio and restructuring of initiatives, which should benefit
the company over the long term.
However, on the tepid side, the company's pacing segments
posted disappointing sales. Also, Spine revenues still maintain a
sluggish trend. Margin pressure too poses a major cause of worry.
Moreover, headwinds such as unfavorable currency movement and
global economic uncertainties persist.
Although, in March this year, the European Patent Office (EPO)
had invalidated, in its entirety, the
) EP2055266 Spenser patent; the earlier injunction against
CoreValve had already impacted Medtronic's sales in the
Key Picks in the Sector
While we prefer to remain on the sidelines regarding Medtronic
at present, some better-ranked medical stocks worth a look
). Both the stocks hold a Zacks Rank #2 (Buy).
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