Here's What Will Shape Medtronic's (MDT) Fate In Q2 Earnings

Medtronic plc (NYSE:MDT) is scheduled to report second-quarter fiscal 2019 results on Nov 20, before the opening bell.

In the last reported quarter, the company delivered earnings ahead of the Zacks Consensus Estimate by 5.4%. In fact, Medtronic’s bottom line outpaced estimates in all the trailing four reported quarters, the average being 4.3%.

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

Key Catalysts

We look forward to another quarter of solid growth on the company’s successful execution of three growth strategies such as therapy innovation, globalization and an increase in Medtronic’s economic value. Combined with the demographics of an aging population, these positives have started to open up opportunities for Medtronic, which should further get reflected in the fiscal second quarter.

The space for therapy innovation is filled with multiple developments. Under the Cardiac and Vascular Group (CVG), new therapies are helping the company gain traction in the rapidly growing MedTech markets for left ventricular assist device (LVAD), transcatheter aortic valve replacement (TAVR), drug-coated balloons, atrial fibrillation ablation and insertable diagnostics.

In the to-be-reported quarter, Medtronic is expected to have maintained a decent market share in the core pacing banking on the back of a continued rollout of the company’s Micra Transcatheter Pacing System and the Azure next generation family of pacemakers.

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 (cardiac rhythm and heart failure), banking on product launch and creation of meaningful markets.

The Zacks Consensus Estimate for CVG revenues in the fiscal second quarter is pegged at $2.84 billion, 2.5% higher than the year-ago number of $2.77 billion.

In the last reported quarter, Medtronic registered mid-single-digit revenue growth in Minimally Invasive Therapies Group (MITG) and Restorative Therapies Group (RTG) plus mid-twenty’s growth in diabetes.

In the quarter to be reported, Medtronic is anticipated to have retained its market share in the MITG, riding on the strength of Advanced Stapling and Advanced Energy. The company is also expected to benefit from a continued strong momentum in robotic-assisted surgery platform.

Medtronic is currently confident about its ability to grow MITG in the band of 4-4.5% during 2018. Particularly, for the fiscal second quarter, MITG revenues are expected to register 5-5.5% growth.

Within RTG, despite ongoing challenges in the Spine market, the company is once again projected to register a robust progress, particularly in Brain & Pain divisions.

Considering its flourish within the brain division, Medtronic is fast capturing the endovascular therapy market for the treatment of ischemic strokes leading to high-teens growth in neurovascular. This apart, the company’s strength of imaging, navigation, robotic and ablation systems are driving growth in neurosurgery. We expect this momentum to continue into the yet-to-be-reported quarter as well.

Within Pain, the company is receiving a positive customer uptake from an array of new offerings in Spinal Cord Stim including Intellis stimulator, Evolve workflow algorithm and Snapshot reporting.

The Zacks Consensus Estimate for RTG revenues in the soon-to-be-reported quarter stands at $1.93 billion reflecting 3.5% growth over the year-ago figure.

Within Diabetes, Medtronic is likely to have sustained U.S. patient demand for its MiniMed 670G hybrid closed loop system. Outside the United States, the company is witnessing strong demand for 640G system. Also, in the fiscal first quarter, the company launched 670G in the international markets. This should further boost its international diabetes revenues in the yet-to-be-reported quarter.

The Zacks Consensus Estimate for Diabetes revenues in the fiscal second quarter stands at $552 million, 19.5% higher than the prior-year number.

Here’s What the Quantitative Model Predicts:

Our proven Zacks model clearly indicates that the company with a favorable 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 a Zacks Rank #2, which increases the predictive power of ESP. However, its Earnings ESP of 0.00% makes surprise prediction difficult. Therefore, such combination makes earnings beat unlikely for the stock this season. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks to Consider

Here are some stocks worth considering from the same space as our proven model shows that these have the right combination of elements to surpass on earnings in the upcoming releases:

Burlington Stores, Inc. (NYSE:BURL) has an Earnings ESP of +2.38% and a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

CalAmp Corp. (NASDAQ:CAMP) has an Earnings ESP of +2.28% and a Zacks Rank #3.

Adobe Inc. (NASDAQ:ADBE) has an Earnings ESP of +2.37% and is a Zacks #2 Ranked stock.

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