Medtronic (MDT) to Report Q2 Earnings: What's in the Offing?

Medtronic plc MDT is scheduled to report second-quarter fiscal 2022 results on Nov 23, before the opening bell.

In the last-reported quarter, the company’s earnings exceeded the Zacks Consensus Estimate by 6.82%. Medtronic surpassed estimates in each of the trailing four quarters, the average surprise being 13.85%.

Let’s see how things have shaped up prior to this announcement.

Factors at Play

Medtronic, which witnessed a strong rebound in product demand across its core business segments during the months of the fiscal first quarter, is likely to have faced a setback in the second quarter in terms of procedure volumes due to the emergence of the Delta variant in certain geographies including the United States.

In fact, the company, on its lastearnings callin August, stated that from the latter part of the fiscal first quarter, it started to observe a gradual slowdown in procedure volume across various business segments. Medtronic projected this more contagious strain of COVID-19 to impact its business widely in the fiscal second quarter, particularly in the United States and in certain of its businesses, like Cardiovascular and Neuroscience, which are more elective and have deferrable procedures like cardiac diagnostics, ICDs, Pain Stim and spine. Further, the company also noted that businesses that require ICU bed capacity for the procedure, like in TAVR, are likely to be adversely impacted in Q2.

However, on a positive note, through the fiscal second-quarter months, the market continued to get back to normalcy even in spite of the COVID-19 resurgence on mass vaccine rollouts. Accordingly, we expect Medtronic to report year-over-year revenue growth for the fiscal second-quarter although the growth might get deterred sequentially.

We expect Medtronic’s Q2 results to reflect year-over-year growth in market share. Especially, the company’s Cardiac Rhythm Management (CRM) business, which has already shown strong market share gain globally, is expected to have continued with this bullish momentum in Q2 driven by the robust performances of non-elective procedures of Micra family of pacemakers, Cobalt and Crome high-power devices, and TYRX Antibacterial Envelopes.

In Neurovascular, Medtronic is expected to have gained from the recent product launches including two new flow diverters: the Pipeline Flex with Shield Technology in the United States and the Pipeline Vantage in Europe as well as Solitaire X 3-millimeter stent retriever.

In diabetes, MDT might have gained from the continued execution of its turnaround strategy. However, at the same time the company might have lost shares in the United States as it waited for new product approvals. The company, in August, noted that despite the current challenges in diabetes, it will return to growth in the near term banking on product pipeline and differentiated technologies.

Medtronic PLC Price and EPS Surprise

Medtronic PLC Price and EPS Surprise

Medtronic PLC price-eps-surprise | Medtronic PLC Quote

Further, Medtronic’s hospital customers have been showing signs of recovery. Purchases of capital equipment have gained momentum. The use of Medtronic’s capital equipment like energy consoles, robotics and navigation systems is tied directly to procedures. Hospitals have been prioritizing spending on this type of equipment. This should get reflected in MDT’s soon-to-be-reported quarter’s results.

Overall, the company earlier expected Q2 organic order growth of around 4% with a currency tailwind of 0 to $50 million. By segment, Cardiovascular sales are projected to grow in the band of 5% to 6%. Neuroscience is likely to grow 6% to 7% while both Medical Surgical and Diabetes are expected to be flat to up 1%, all on an organic basis.

Q2 Estimates

The Zacks Consensus Estimate for Medtronic’s fiscal second-quarter total revenues of $7.93 billion suggests a 3.7% rise from the prior-year reported number. The consensus mark for earnings of $1.28 per share implies a 25.5% decline from the year-ago reported figure.

What Our Quantitative Model Predicts

Per our proven model, a stock needs to have the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to deliver an earnings surprise. But this is not the case here as you will see below.

Earnings ESP: Medtronic has an Earnings ESP of -1.88%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Medtronic currently carries a Zacks Rank #4 (Sell).

Stocks Worth a Look

Here are a few stocks worth considering as these have the right combination of elements to beat on earnings this reporting cycle.

American Eagle Outfitters AEO currently has an Earnings ESP of +4.01% and a Zacks Rank #3. The company is likely to register a 74.3% improvement in earnings when it reports third-quarter fiscal 2021 numbers.

American Eagle's top line is expected to rise year over year. The Zacks Consensus Estimate for American Eagle’s quarterly revenues is pegged at $1.23 billion, which indicates an improvement of 19.1% from the figure reported in the prior-year quarter. AEO has a trailing four-quarter earnings surprise of 7.54%, on average.

Costco COST currently has an Earnings ESP of +1.00% and a Zacks Rank #2. The company is expected to register EPS growth when it reports first-quarter fiscal 2022 results. The Zacks Consensus Estimate for Costco’s quarterly earnings of $2.59 per share suggests growth of 13.1% from the year-ago quarter’s reported figure

Costco’s top line is also expected to rise year over year. The consensus mark for revenues is pegged at $49.6 billion, indicating an increase of 14.8% from the figure reported in the year-ago quarter. COST has a trailing four-quarter earnings surprise of 7.7%, on average

Bank Of Montreal BMO currently has an Earnings ESP of +0.51% and a Zacks Rank of 2. The company is likely to register an increase in the bottom line when it reports fourth-quarter fiscal 2021 numbers. The Zacks Consensus Estimate for Bank Of Montreal’s quarterly earnings has moved up 0.2% in the past 30 days to $10.08 per share. This suggests a 36.5% increase from Bank Of Montreal’s year-ago reported number.

Bank Of Montreal has a trailing four-quarter earnings surprise of 25.15%, on average. BMO’s long-term expected growth rate is pegged at 15.8%.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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