We expect medical device major
) to beat expectations when it reports its fourth-quarter and
full-year fiscal 2014 financial results on May 20, 2014.
Why a Likely Positive Surprise?
Our proven model shows that Medtronic is likely to beat earnings
because it has the right combination of two key ingredients.
: Expected Surprise Prediction or
represents the difference between the Most Accurate estimate and
the Zacks Consensus Estimate. Medtronic has a Zacks ESP of +0.89%.
This is very meaningful and a leading indicator of a likely
positive earnings surprise for shares.
: Medtronic carries a Zacks Rank #3 (Hold). Note that stocks with
Zacks Rank #1, 2 and 3 have a significantly higher chance of
beating earnings. The Sell-rated stocks (#4 and 5) should never be
considered going into an earnings announcement.
The combination of Medtronic's Zacks Rank #3 and +0.89% ESP makes
us confident of a possible earnings beat on May 20. It is worth
noting in this context that Medtronic has delivered positive
surprises in 2 of its last 4 quarters, with an average beat of
What is Driving the Better-than-Expected Earnings?
Medtronic posted a mixed third quarter fiscal 2014 with in-line EPS
and a revenue beat., While adjusted earnings of 91 cents per share
were down 2% year over year and in line with the Zacks Consensus
Estimate, revenues grew 4% (at constant currency basis or CER) to
$4.163 billion beating the Zacks Consensus Estimate of $4.155
It is noteworthy to mention that all eight of Medtronic's primary
businesses were stable or on an uptrend in the last reported
quarter, with a consistent pattern of increasing stabilization in
At present, management is focused on enhancing operational
excellence to deliver consistent and reliable results. Medtronic is
quite confident that its three primary strategies viz. therapy
innovation, globalization and economic value will strengthen,
diversify and expand its market leading competitive position in the
Earlier this month, Medtronic presented clinical trial data afresh
at Heart Rhythm 2014, demonstrating a new set of advanced
pacemakers that can significantly delay the progression of
persistent atrial fibrillation (AF) in patients with bradycardia.
Patients using these pacemakers revealed a reduced rate of
AF-related hospitalizations and emergency room visits.
Additionally, this device has the potential to save approximately
$1,218 per patient in healthcare costs over a 10-year span. This
device in addition of providing patient benefits, can positively
impact healthcare cost and thus can be expected to be preferred by
both physicians and patients in the long term.
Besides, hospitals are investing in Medtronic's capital equipment
for spine surgery as they witness clear value from improved
surgical precision and more efficient procedures. This is resulting
in solid growth of capital equipment sales in the company's
surgical technologies business as well as increased spinal implant
growth. In fact, in accounts that have adopted Medtronic's surgical
synergy program, core spine revenue growth is significantly higher.
Moreover, with globalization on the rise, Medtronic is targeting
the multibillion dollar annual opportunity in emerging markets,
particularly in densely populated countries like China and
Here are some other healthcare stocks that we had speculated as
capable of delivering an earnings beat in their recently reported
Align Technology Inc.
) had an Earnings ESP of +13.89% for the first quarter of 2014 and
a Zacks Rank #1 (Strong Buy). The company eventually delivered a
positive surprise of 8.33% in the last reported quarter.
) had an earnings ESP of +50.00% for the first quarter of 2014 and
a Zacks Rank # 2 (Buy). The company delivered a positive surprise
of 50.0% in the quarter.
Cardinal Health, Inc
) had an earnings ESP of +1.00% for the third quarter of fiscal
2014 and a Zacks Rank #2 (Buy). The company eventually delivered a
positive surprise of 1.0% in the quarter.
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