Leading medical devices company
) is scheduled to report its first quarter fiscal 2013 results
before the market opens on Tuesday, August 21, 2012. The company is
expected to earn EPS of 85 cents on revenues of $4.015 billion
during the quarter, according to the Zacks Consensus Estimates.
Medtronic exceeded its expectations twice in the last four
quarters and was in line with the remaining two. Over the past four
quarters average earnings surprise is a positive 1.73%. This
implies that the company has surpassed the Zacks Consensus Estimate
by this magnitude over the last four quarters.
Previous Quarter Highlights
Medtronic reported fourth quarter fiscal 2012 adjusted EPS of 99
cents, up 10% year over year and ahead of the Zacks Consensus
Estimate by a penny. Revenues were $4.297 billion in the quarter,
up 3% (up 4% at constant exchange rates or CER) year over year,
beating the Zacks Consensus Estimate of $4.233 billion.
Medtronic's six divisions - CRDM, Spinal, CardioVascular,
Neuromodulation, Diabetes, and Surgical Technologies - generated
corresponding sales of $1.295 billion (down 2% year over year but
flat at CER), $958 million (up 9% or up 10% at CER), $818 million
(down 7% or down 6% at CER), $463 million (up 7% or up 8% at CER),
$392 million (up 7% or up 8% at CER), and $371 million (up 24% or
up 25% at CER).
Agreement of Estimate Revisions
Estimate revision trends among the analysts for the fourth
quarter and the full fiscal year have been insignificant. Over the
last 30 days, out of 18 estimate revisions, 1 has been revised
upward with 1 in the opposite direction. The current fiscal year
has experienced 1 upward revision over the past month with 2
revisions in the negative direction.
As reported by other MedTech majors such as
St Jude Medical
), we expect unfavorable currency to adversely impact Medtronic's
first quarter performance.
The company's performance in the CRDM market is awaited as other
major players have reported declining sales from this segment.
Although Spine, struggling with its headwinds, will continue to
disappoint, sales of the CardioVascular segment would benefit from
the recent launch of the Resolute Integrity drug eluting stent for
the treatment of coronary artery disease. During the last quarter,
the company recorded an increase in market share subsequent to the
launch of Resolute Integrity. Besides, we also expect growth in the
atrial fibrillation business to maintain the growth momentum.
Medtronic's prominent presence in the European market, which is
shrouded in macroeconomic challenges, might affect the company's
sales growth. The company might have to revise its guidance
for 2013 to reflect the current challenges at play.
Magnitude of Estimate Revisions
Given the dearth of estimate revisions from the analyst
community, the consensus estimate for the current quarter remained
static at 85 cents over the past one month. The consensus estimate
for fiscal 2013 also remained unchanged at $3.66.
Having witnessed several headwinds in its two segments - CRDM
and Spinal - Medtronic is trying every means to revive growth. This
includes penetration of international markets, portfolio expansion
and restructuring initiatives, which should benefit the company
over the long term. Moreover, acquisitions completed over the past
few years are contributing to total revenues, a positive trend that
is expected to continue. Meanwhile, Medtronic has increased its
focus on the emerging markets that have been garnering significant
Longer term, we have a Neutral recommendation on Medtronic. The
stock retains a Zacks #3 Rank ("Hold") in the short term.
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