Medtronic (MDT) Gains Market Share Despite COVID Headwinds – March 3, 2022


The increase in the adoption of Medtronic plcit’s (MTD Free report) globally accepted advanced therapies is encouraging. However, unfavorable currency developments and global economic uncertainties continue to affect Medtronic. The stock currently carries a Zacks rank #3 (Hold).

Over the past year, Medtronic has outperformed the industry. The stock fell 12% compared to the industry’s 15.6% decline.

Medtronic’s earnings in the third quarter of fiscal 2022 beat the Zacks consensus estimate. The company recorded organic growth in the Cardiovascular, Neuroscience and Diabetes segments. Within the Cardiovascular Division, Cardiac Rhythm Management, one of Medtronic’s largest businesses, continued to build on the company’s leadership in its category, adding more than 1.5 points of market share . In the medical-surgical portfolio, the company gained shares in GI, driven by momentum from the recently launched Emprint HP Generator and Beacon Ultrasound Endoscopic franchise.

In respiratory interventions, despite the year-over-year headwind as ventilator sales continue to return to pre-pandemic levels, Medtronic gained about 400 basis points of market share. In the neuroscience portfolio, the company gained market share in cranial and spinal technologies.

From a geographic perspective, emerging markets (18% of total revenue) was relatively stronger than US and non-US development market revenue, growing 7% year-over-year, driven by strength in South Asia, Latin America and the Middle East and Africa. .

Gross and operating margins for the quarter improved year over year. The fiscal 2022 fourth quarter revenue forecast, showing 4.37% year-over-year growth on a reported basis, provides investors with optimism.

Since the start of fiscal 2022, Medtronic has experienced a strong recovery and is showing a return to growth. This recovery is not only driven by the recovery from the pandemic, but also by the large flow of new products Medtronic is bringing to market during this time. In addition, the proliferation of mergers and acquisitions and the implementation of a new operating model should contribute to the recovery dynamic.

Although the pace of recovery from the COVID-19 disruption was slowed in the fiscal third quarter by the emergence of the Omicron variant, Medtronic noted an improvement in procedure volumes beginning in the first weeks of February. The company’s outlook for the fourth quarter assumes a continued recovery in caseload through March and April. Medtronic expects to return to pre-COVID levels in most of its markets before the end of the fourth fiscal quarter.

On the other hand, Medtronic’s second-quarter fiscal 2022 revenue missed the Zacks consensus estimate. The lackluster early results reflect the adverse market impact of COVID-19 and healthcare system staffing shortages on medical device procedure volumes, primarily in the United States. Specifically, case volumes were lighter than expected in markets where the Company’s products are used in the most deferred cases. For example, the company’s spine business was sluggish and procedures requiring critical care bed capacity like TAVR were down in the second quarter of the fiscal year.

Given the greater than expected market impact of the pandemic and healthcare system staffing issues in the second quarter of fiscal year, which are also expected to continue into the second half of fiscal year 2022 , Medtronic now expects full-year 2022 organic revenue growth of 7-8%, down from the earlier expectation of around 9%.

Medtronic noted that while it expects the impact of the resurgence of COVID to diminish, the effect of the ongoing pandemic on businesses in multiple markets remains difficult to predict. In the third quarter of fiscal 2022, the company’s revenues in the United States were flat. Non-US developed markets were up only 1%, taking into account the impacts of Omicron.

Key Choices

A few higher ranked stocks in the broader medical field are McKesson Corporation (MCK free report), AMN Healthcare Services, Inc. (AMN free report) and Bio-Rad Laboratories, Inc. (ORGANIC free report).

McKesson, carrying a Zacks rank of No. 2 (buy), reported third-quarter fiscal 2022 adjusted EPS of $6.15, which beat the Zacks consensus estimate of 5 by 14.3%. $.38. You can see the full list of today’s Zacks #1 Rank stocks here.

McKesson has a long-term earnings growth rate of 11.8%. MCK gained 49.7% against industry growth of 4.7% over the past year.

AMN Healthcare, carrying a No. 1 Zacks rank, has a long-term earnings growth rate of 16.2%. The company has beat earnings estimates over the past four quarters, delivering an average 19.5% surprise.

AMN Healthcare has outperformed its industry over the past year. AMN gained 23.8% compared to the industry’s 62% decline.

Bio-Rad reported Q4 2021 Adjusted EPS of $3.21, which beat Zacks’ consensus estimate of 11.9%. He currently has a No. 2 Zacks rank.

Bio-Rad has an earnings yield of 2.3%, which compares favorably to negative industry performance. BIO has exceeded earnings estimates over the past four quarters, with the average surprise being 66.9%.


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