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Medtronic Gains 4% As Quarterly Profit Tops Estimates Amid Faster Recovery
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Medtronic Gains 4% As Quarterly Profit Tops Estimates Amid Faster Recovery

Medtronic shares rose almost 4% after the medical device maker beat quarterly revenue and profit estimates amid a gradual resumption of elective surgeries as some Covid-19 restrictions are lifted.  

Shares advanced 3.7% to $104.08 in early market trading. In the first quarter ended July 31, Medtronic’s (MDT) sales dropped 13% to about $6.51 billion, beating the Street consensus by $1.03 billion. Net income attributable to the company plunged 44% to $487 million, or 36 cents per share, during the reported quarter, from $864 million, or 64 cents per share, in the year-earlier period. On an adjusted basis, Medtronic earned 62 cents per share, exceeding analysts’ estimates by 44 cents.

“We reported solid improvement from last quarter, and our results reflect a faster than expected recovery from the depths of the pandemic we saw back in April,” said Medtronic CEO Geoff Martha. “Procedure volumes began to recover around the world, and we’re leveraging our pipeline of innovative products to drive share gains in a number of key businesses.”

Meanwhile, Medtronic posted a 5% increase in first-quarter sales at its respiratory, gastrointestinal & renal business driven by heightened demand for respiratory interventions products. In addition, respiratory & patient monitoring grew in the mid-single digits, with sales of ventilators more than doubling as production rose to address global needs, the company added.

The medical device maker employs more than 90,000 people worldwide, serving physicians, hospitals and patients in more than 150 countries.

Medtronic shares have been hard hit dropping 9% on a year-to-date basis as many hospitals that use its medical devices had deferred elective procedures due to the coronavirus pandemic. (See Medtronic stock analysis on TipRanks).

Ahead of the financial results, Cohen & Co. analyst Josh Jennings last week reiterated a Buy rating on the stock with a $110 price target, saying shares should benefit from the company’s fiscal calendar in F1Q’21.

Jennings had expected results to reflect strong elective procedure recovery trends. While this is anecdotally understood, Street models do not fully account for the month/month improvements experienced from May through July, he added.

“The extra selling week [in April] dynamic provides us with confidence that MDT’s business units performed at a similar level to competitors who have already reported C2Q’20 results,” Jennings wrote in a note to investors.

The rest of the Street shares Jennings’ bullish outlook on the stock. The Strong Buy analyst consensus boasts 9 Buy ratings versus 1 Hold rating. The $112.17 average analyst price target implies 8% upside potential in the shares over the coming year.

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