What's In The Cards For Medtronic (MDT) In Q1 Earnings?

Medtronic plc MDT is scheduled to report first-quarter and fiscal 2023 results on Aug 23, before the opening bell.

In the last reported quarter, the company's earnings lagged the Zacks Consensus Estimate by 2.56%. Medtronic surpassed estimates in three of the trailing four quarters and missed in one, the average surprise being 1.83%.

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

Factors at Play

Medtronic witnessed an adverse trend of procedure volume across its core business over the past few quarters, impacted by the choppy macroeconomic scenario globally. Per the company's May 2022 update, the full impact of inflation with increased freight expense will be realized in Q1 and Q2 of fiscal 2023. Further, challenges related to the global supply chain as well as extended COVID-led restrictions in China are expected to have impacted the company's major business lines.

In this regard, in fiscal Q4, Medtronic particularly faced raw material shortages within the Surgical Innovations arm resulting in large backorders. The business revenues came well below the company's expectations. Several of other business too faced similar challenges. Going by the global trend, we expect the company to once again report an adverse effect related to these global supply chain issues in fiscal Q1.

In terms of the bottom line, according to the company, the full impact from inflation on raw material and direct labor costs will be realized over the next couple of quarters as inventory rolls off the balance sheet, negatively affecting gross margin.

Meanwhile, Cardiovascular portfolio and cardiac rhythm management businesses are expected to have gained in Q1 fiscal 2023 on the recently launched Leadless Pacemakers, including Micra AV in Japan and China as well as Micra VR in China.

Medtronic PLC Price and EPS Surprise

Medtronic PLC price-eps-surprise | Medtronic PLC Quote

In the neuroscience portfolio, the company is expected to have increased market share in Cranial and Spinal technologies. Demand for the company's new spine implants is expected to have contributed to the growth. Strong adoption of AI-enabled surgical planning platform among the U.S. user base, the launch of the Catalyft expandable titanium interbody system and the rollout of enabling technologies are expected to have contributed to the growth in Q1. The Mazor robotics system and StealthStation navigation system particularly are expected to have performed strongly in the to-be-reported quarter.

In Neuromodulation, over the past few months, Medtronic has been witnessing strong momentum from new products in both Pain Stim and Brain Modulation.

Within Pelvic Health, the FDA approval of the company's next-generation InterStim recharge-free device and InterStim X are expected to have contributed to top-line growth.

In Medical Surgical and surgical robotics, Medtronic remains focused on the limited market release of the Hugo robot while it scales production. The company recently completed Hugo installations in Denmark, France, and Italy, which should have added to the company's Q1 top-line growth within this arm.

In Diabetes, MDT might have gained from the continued execution of its turnaround strategy. Germany and France recently began reimbursement of MiniMed 780G insulin pump, combined with the Guardian 4 sensor system, which is likely to have added to the top line. However, at the same time, the company is expected to have lost its share in the United States due to regulatory complications. Meanwhile, CMS' Medicare coverage expansion (announced in December 2021) to include CGMs that integrate with Medtronic insulin pumps is expected to have a partial-quarter contribution to this business revenues in the first quarter.

Q1 Estimates

The Zacks Consensus Estimate for Medtronic's fiscal first-quarter total revenues of $7.20 billion suggests a 9.8% rise from the prior-year reported number. The consensus mark for earnings of $1.12 per share implies a 20.6% plunge 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 ESPand 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 -0.57%. 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).

Other Releases

Some stocks in the broader medical space that have announced quarterly results are Hanger HNGR, Molina Healthcare MOH and Merck & Co. MRK.

Hanger, carrying a Zacks Rank #2 (Buy), reported second-quarter 2022 adjusted EPS of 35 cents, which beat the Zacks Consensus Estimate by 16.7%. Revenues of $312 million outpaced the consensus mark by 1.8%.

Hanger has an earnings yield of 6.1% compared with the industry's 3.8%. HNGR's earnings surpassed estimates in three of the trailing four quarters, the average being 25.9%.

Molina Healthcare, having a Zacks Rank #2, reported second-quarter 2022 adjusted EPS of $4.55, which beat the Zacks Consensus Estimate by 4.8%. Revenues of $8.1 billion outpaced the consensus mark by 6.2%.

Molina Healthcare has a long-term estimated growth rate of 16.4%. MOH's earnings surpassed estimates in the trailing four quarters, the average being 3.2%.

Merck reported second-quarter 2022 adjusted earnings of $1.87 per share, beating the Zacks Consensus Estimate of $1.67. Revenues of $14.6 billion surpassed the Zacks Consensus Estimate by 5.4%. It currently has a Zacks Rank #2.

Merck has a long-term estimated growth rate of 10.1%. MRK's earnings surpassed estimates in the trailing four quarters, the average surprise being 16.8%.

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