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Medtronic (MDT) to Report Q1 Earnings: What's in Store?

Zacks Equity Research

Medtronic plc MDT is scheduled to report first-quarter fiscal 2020 results on Aug 20, before the opening bell.

In the last reported quarter, the company’s earnings beat the Zacks Consensus Estimate by 5.48%. Moreover, the bottom line outpaced estimates in the trailing four quarters, the average being 5.49%.

Let’s see how things are shaping up prior to this announcement.

Key Catalysts

We are upbeat about Medtronic’s successful execution of growth strategies, such as therapy innovation, globalization and increase in economic value. Combined with the demographics of an aging population, these positives opened up wide opportunities for the company, which should get reflected in the upcoming quarterly results.

The therapy innovation space has been seeing multiple developments. Under Cardiac and Vascular Group ("CVG"), new therapies are helping the company gain traction from the rapidly growing MedTech market for left ventricular assist device, transcatheter aortic valve replacement, drug-coated balloons, atrial fibrillation ablation and insertable diagnostics.

Medtronic PLC Price and EPS Surprise

Medtronic PLC Price and EPS Surprise

Medtronic PLC price-eps-surprise | Medtronic PLC Quote

There has been a consistent and gradually stabilizing trend in the global cardiac rhythm and heart failure ("CRHF") market. In the fiscal first quarter, the company is expected to register strong growth in its ICD (implantable cardioverter defibrillator) and CRT (cardiac resynchronization therapy) product lines within the scope of CRHF, banking on product launch and creation of meaningful markets.

Strong demand for the company's Micra transcatheter pacing system, Arctic Front AF ablation catheters, Reveal LINQ product lines and a robust performance in TAVR franchise are steadilydriving Medtronic’s revenues within this niche.

However, in the to-be-reported quarter, this growth can be offset by weakenedsales of left ventricular assist device (LVAD) as a result of market share loss (due to the regulatory approval of Abbott’s competitive product HeartMate 3) and certain unfavorable changes in the heart transplant guideline. This apart, sales may decline as the company is in its CRM replacement cycle.

Overall, the Zacks Consensus Estimate for CVG revenues in the fiscal first quarter is pegged at $2.76 billion, indicating a 1.8% dip from the year-ago reported number.

Within Restorative Therapies Group ("RTG"), the company is again projected to register a solid progress, particularly in Brain & Pain divisions despite challenges in the Spine market.

Medtronic’s integrated robotics and navigation platform Mazor X Stealth is expected to drive growth in Neurosurgery business along with creating demand for the core spine implants.

The Zacks Consensus Estimate for RTG revenues in the fiscal first quarter stands at $1.98 billion, implying a 10.8% decline from the last reported figure.

Within Minimally Invasive Therapies Group ("MITG"), the company is once again expected to deliver higher revenues, banking on sturdy sales of Advanced Stapling and Advanced Energy products. However, the company’s Surgical Innovations businessmay persistently suffer challenges due tothe shutdown of a major sterilization supplier’s facility.

The Zacks Consensus Estimate for MITG revenues in the fiscal first quarter is pegged at $2.07 billion, suggesting an 8.1% drop from the last reported quarter.

Within Diabetes, Medtronic will likely to sustain U.S. patient demand for its MiniMed 670G hybrid closed loop system in the June quarter. Outside the United States, the company is witnessing buoyant demand for 640G system. It is continuing with the launch of MiniMed 670G in some European countries, which in turn, should consistently boost its international diabetes revenues.

The Zacks Consensus Estimate for Diabetes revenues is pinned on $589 million, indicating an increase of 2.9% from the prior-year reported figure.

Here’s What the Quantitative Model Predicts

The proven Zacks model shows that a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has high chances of beating estimates if it also has a positive Earnings ESP.

Medtronic has an Earnings ESP of -0.2% and a Zacks Rank #2, resulting in a combination that fails to increase the odds of a positive surprise prediction. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.

The Zacks Consensus Estimate for earnings per share of $1.18 implies a 0.85% rise from the year-ago reported number.

Stocks Worth a Look

Here are a few stocks with the right combination of elements to beat on earnings this reporting cycle.

The Cooper Companies, Inc. COO has an Earnings ESP of +1.50% and a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Premier, Inc. PINC has an Earnings ESP of +0.77% and a Zacks Rank #3.

Catalent, Inc. CTLT has an Earnings ESP of +1.56% and a Zacks Rank of 3.

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