Wells Fargo: Medtronic An Accelerating Growth Story Trading At A Discount

Medtronic PLC MDT has earned a bullish review from Wells Fargo Securities, which premised its optimistic outlook on the company's growth prospects.

The Analyst

Larry Biegelsen upgraded Medtronic from Market Perform to Outperform and increased the price target from $100 to $110.

The Thesis

Medtronic's late-stage pipeline will likely drive a growth acceleration beginning in May 2020 and extending into fiscal 2021, Biegelsen said in a Tuesday note. (See his track record here.) 

The company has managed Street expectations over the past year, exceeding EPS estimates by an average of 6-7 cents over the past four quarters, the analyst said. 

Medtronic shares are trading at a 20-percent discount to large-cap medtech peers, and the discount could close as the pipeline materializes and top-line growth accelerates, he said. 

Wells Fargo raised its 2020-2024 revenues estimates for Medtronic by $22 million, $181 million, $342 million, $483 million and $554 million, respectively, on the basis of the following: 

• Greater market share capture from Micra AV.
• The inclusion of a surgical robot to the firm's model, with a potential launch in 2020.
• The adding back of renal denervation estimates to the model.

Biegelsen raised 2020-2024 EPS estimates by a penny, 3 cents, 6 cents, 10 cents and 6 cents, respectively.

Wells Fargo sees Medtronic as an accelerating growth story trading at a discount to peers, the analyst said. The firm estimates an acceleration in organic growth from 2.8 percent in the first quarter to 4.4 percent in the fourth quarter and from 3.8 percent in 2020 to 4.7 percent in 2021, he said. 

The firm sees the following as drivers of this acceleration:

• The Micro AV leadless pacemaker.
• The surgical robotic platform.
• Reveal Linq 2.0.
• The 780G diabetes pump.
• The next-gen Interstim device.

The Price Action

Medtronic shares were up 1.55 percent at $95.87 at the time of publication Wednesday. 

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Photo courtesy of Medtronic.