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Medtronic Posts Mixed Q2 Results; Shares Fall 3%

Shares of Medtronic (MDT) were down 3% on November 23, and closed at $113.38 after the medical technology company reported mixed fiscal Q2 results.]

The quarterly performance was affected by negative market impact of the COVID-19 resurgence, and healthcare system staffing issues. The company also reduced its revenue growth guidance for fiscal 2022.

Headquartered in Minneapolis, U.S., Medtronic is an American-Irish registered medical device company that primarily operates in the U.S. (See Medtronic stock charts on TipRanks)

Mixed Q2 Results

Q2 Revenues grew 3% year-over-year to $7.8 billion, but fell short of consensus estimates of $7.96 billion. The shortfall in revenues is indicative of the negative impact of COVID-19 and health system staffing shortages on medical device procedure volumes, mainly in the U.S. As a result, U.S. revenue, which represents 51% of the company’s revenue, declined 1% to $3.997 billion.

Meanwhile, Non-U.S. developed market revenue (32% of revenues) increased 1% to $2.478 billion, whereas Emerging Markets revenue (17% of revenues) increased 20% to $1.372 billion

However, adjusted earnings of $1.32 per share grew 29% year-over-year, 3 cents ahead of analysts’ expectations of $1.29 per share. 

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Medtronic Updates Fiscal 2022 Guidance

Medtronic slashed its revenue growth guidance and reiterated its earnings per share (EPS) guidance range for the fiscal year 2022. The revised revenue guidance is based on the expectations of the continuing impact of the pandemic on the market and hospital staffing shortages into the second half of the fiscal year,

FY2022 revenues are now forecast to grow 7-8% on an organic basis against previously guided growth of 9%.

However, the company continues to forecast the fiscal year 2022 adjusted earnings in the range of $5.65 per share to $5.75 per share, while the consensus estimate is pegged at $5.71 per share.  

CEO Comments

Medtronic CEO, Geoff Martha, commented, “During the quarter, we continued to advance our pipeline, launched new products, and grew share in the majority of our businesses.”

Looking forward, the CEO further added, “As our markets recover, Medtronic is one of the best positioned companies in healthcare. We have an expansive pipeline of leading technology, a robust balance sheet, and an expanding roster of proven top talent. Coupled with our revitalized operating model and new competitive mindset, we’re poised to accelerate and sustain growth.”

Analysts Recommendation

Following the earnings release, Piper Sandler analyst Matt O’Brien reiterated a Buy rating on the stock with the price target of $152 (34% upside potential).

Based on the company’s ability to deliver 5% normalized revenue growth in fiscal 2023 and beyond, O’Brien maintains a cautiously optimistic stance on Medtronic.

He added that the company’s diabetes franchise is slightly improving. He further remains positive about the surgical robot’s strong demand despite COVID-related constraints.

Consensus among analysts is a Strong Buy based on 15 Buys and 1 Hold. The average Medtronic price target of $147.13 implies 29.77% upside potential to current levels.

TipRanks data shows that financial blogger opinions are 91% Bullish on MDT, compared to a sector average of 69%.

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