Will Diabetes Arm Aid Medtronic's (MDT) Q2 Earnings Again?

Medtronic plc’s (NYSE:MDT) Diabetes Group has been on a solid growth trajectory of late, courtesy of encouraging contributions from a majority of its sub-segments.

We expect this strength to reflect in second-quarter fiscal 2019 results, which are scheduled to release before the opening bell on Oct 20.

Click here to know how the company’s overall performance in the fiscal second quarter is expected to be.

Diabetes in Focus

The Diabetes Group comprises the Intensive Insulin Management (IIM), Non-Intensive Diabetes Therapies (NDT) and Diabetes Services & Solutions (DSS) divisions. The Diabetes business develops, manufactures and markets advanced, integrated diabetes management solutions including insulin pump therapy, continuous glucose monitoring (CGM) systems and therapy management software.

In the last reported quarter, Diabetes Group delivered its best performance in more than a decade with 26.3% growth, driven by sustained strong demand for MiniMed 670G hybrid closed loop system. Outside the United States, the business grew in high-teens, driven by the sales of MiniMed 640G. With MniMed 670G starting to get commercialized in the international markets, we expect this trend to further improve. In this regard, in June, the company received a CE Mark for the MiniMed 670G hybrid closed loop system.

Medtronic PLC Price and EPS Surprise

Medtronic PLC Price and EPS Surprise | Medtronic PLC Quote

In standalone CGM, the U.S. launch of Guardian Connect product is off to a solid start, claiming a sizeable share in the $1-billion standalone CGM market. Per Medtronic, combined with the Sugar.IQ assistant, Guardian Connect is the only Smart CGM using the cognitive computing capability of IBM (NYSE:IBM) Watson to offer personalized insights and predictive alerts. The higher CGM sensor attachment and utilization is driving CGM sales growth and creating a consistent long-term annuity stream for the company’s Diabetes Group.

We note that management expects revenue growth in low to mid-teens’ range for the Diabetes Group in fiscal 2019. Per management, a strong adoption of the MiniMed 670G system in the United States along with the U.S. launch of Guardian Connect systems and an enhanced sensor supply capacity will drive this upside.Particularly, for the fiscal second quarter,diabetes business is expected to grow around 20% on a year-over-year basis.

Consequently, the Zacks Consensus Estimate for Diabetes Group revenues of $552 million indicates a rise of 19.4% from the year-ago quarter.

Zacks Rank

Medtronic currently carries a Zacks Rank #3 (Hold).

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 beat on earnings in the upcoming releases:

Burlington Stores, Inc. (NYSE:BURL) has an Earnings ESP of +3.01% and a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Best Buy Co., Inc. (NYSE:BBY) has an Earnings ESP of +1.47% and a Zacks Rank of 3.

AutoZone, Inc. (NYSE:AZO) has an Earnings ESP of +3.02% and is a Zacks #2 Ranked stock.

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