MDT – Medtronic (MDT) Q1 Earnings to Benefit From Market Share Gains

Medtronic plc (MDT Free Report) is scheduled to report first-quarter fiscal 2022 results on Aug 24, before the opening bell.

In the last reported quarter, the company’s earnings exceeded the Zacks Consensus Estimate by 5.63%. The company missed estimates in one of the trailing four quarters and surpassed the same in the other three, the average surprise being 60.95%.

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

Factors at Play

Medtronic, which has a strong global base, is expected to have witnessed a strong rebound in product demand across its core business segments during the months of its fiscal first quarter, with the market getting back to normalcy on reduced new COVID-19 case count and mass vaccine rollouts. This is likely to have boosted its fiscal first-quarter top line.

Since the beginning of calendar year 2021, the company has been consistently outperforming the markets with new product launches driving share gains in an increasing number of Medtronic businesses.

Even with the pandemic adversely impacting the procedures, we expect to Medtronic’s Q1 results to reflect growth in market share. Especially, the company’s Cardiac Rhythm Management (CRM) business, which has already shown strong market share gain globally in the last reported quarter, is expected to have continued with this bullish momentum in Q1 driven by robust performances of Micra leadless pacemaker, Cobalt and Crome High Power devices.

However, in Neurovascular, the company, in May 2021 noted that it estimates to lose a couple of points of share year over year, primarily due to new competitive flow diverters from Stryker and Terumo. That said, Medtronic expected shares to stabilize sequentially in fiscal Q1 banking on the launch of Solitaire X 3-millimeter stent retriever in the United States and the limited launch of pipeline vantage flow diverter in certain CE mark countries.

In fact, considering market share as one of the key metrics in evaluating performance, the company in its May 2021 update noted that, starting from fiscal 2022, this metric will be included in its incentive compensation. This should get reflected in the company’s fiscal first-quarter results.

Further, Medtronic’s hospital customers have been showing signs of recovery. Purchases of capital equipment have gainedmomentum. Notably, 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 the company’s soon-to-be-reported quarter’s results.

The company earlier noted that there will be strong recovery and its ability to return to growth will outpace its competitors. Strong new product flow in the core segments, increase in tuck-in M&As, and the recent implementation of a new operating model are expected to have contributed strongly to the company’s first-quarter top line.

During its May 2021 update, Medtronic stated that it expects first-quarter organic growth to be in the range of 17% to 18% and a currency tailwind between $200 million and $250 million.

By segment, the company earlier expected Q1 Cardiovascular sales to grow in the band of 14% to 15%, Medical Surgical to grow 18% to 19%, Neuroscience to grow 25% to 26% and Diabetes to remain flat year over year.

Q1 Estimates

The Zacks Consensus Estimate for fiscal first-quarter total revenues of $7.85 billion suggests 20.7% rise from the prior-year reported number. The consensus mark for earnings of $1.31 per share implies 111.29% 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 0.00%. 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 #3.

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.

Advance Auto Parts, Inc. (AAP Free Report) has an Earnings ESP of +13.22% and a Zacks Rank of 2, at present. The company is slated to release second-quarter fiscal 2021 results on Aug 24.

Abercrombie & Fitch Company (ANF Free Report) has an Earnings ESP of +13.89% and a Zacks Rank of 1, at present. The company is slated to release second-quarter 2021 results on Aug 26.

Burlington Stores, Inc. (BURL Free Report) has an Earnings ESP of +20.61% and a Zacks Rank of 1, at present. The company is slated to release second-quarter 2021 results on Aug 26.