Will Medtronic (MDT) Q4 Earnings Show Growth In All Lines?

Medtronic plc (NYSE:MDT) is scheduled to report its fourth quarter and fiscal 2018 results before the opening bell on May 24.

Last reported quarter, the company delivered earnings ahead of the Zacks Consensus Estimate by 0.86%. In fact, Medtronic’s bottom line outpaced estimates in all the trailing four quarters with an average beat of 3.54%.

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 fourth quarter as well.

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 market share in the core pacing, ICD (implantable cardioverter defibrillator) and CRT (cardiac resynchronization therapy) product lines within the scope of CRHF (cardiac rhythm and heart failure) while creating new meaningful markets to enhance the company’s weighted average market growth.

Within the TAVR space, the company hopes to see continued global growth on strong adoption of Evolut PRO valve around the world as well as expansion in the traditional U.S. TAVR centers and U.S. share capture, resulting from Medtronic’s new intermediate risk indication.

After several quarters of dull Drug Eluting stent (DES) performance in coronary, the company’s DES product line witnessed growth in both the United States and Japan since the last few quarters. This upside is driven by the recent launch of Resolute Onyx in the said markets. Further, these developments buoy optimism and strengthen our belief for a strong quarterly performance by the company.

Notably, following the FDA approval in February, Medtronic announced the U.S. launch of the Resolute Onyx 2.0 mm DES, the smallest sized DES in the market. We expect this to contribute to the company’s DES business in the yet-to-be-reported quarter.

The Zacks Consensus Estimate for CVG revenues in the fiscal fourth quarter is pegged at $3.10 billion, 9.1% higher than the year-ago number of $2.85 billion.

Within Minimally Invasive Therapies Group (MITG), surgical innovations should register sturdy growth, driven by new products in advanced stapling and advanced energy. Advanced stapling growth should come on the back of endo stapling specialty reloads with Tri-Staple technology as well as Signia. Advanced Energy growth should bank on a consistent rollout of the company’s LigaSure instruments and Valleylab FT10 energy platform.

Medtronic currently remains confident about its ability to grow MITG in the mid-single-digit over the longer term.

Within the Restorative Therapies Group (RTG), the company witnesses encouraging developments regarding the brain therapy space. This division experienced 5% growth during the fiscal third quarter, driven by high teens growth in neurovascular and strong sales of StealthStation navigation as well as O-arm imaging technologies, which further led to low double-digit growth in neurosurgery. We expect this bullish trend to continue in the last-completed quarter as well.

Within Pain, the company awaits a positive customer uptake from Intellis platform and an evolved workflow.

The Zacks Consensus Estimate for RTG revenues in the soon-to-be-reported quarter stands at $2.09 billion, 60.3% above the year-ago reported figure.

Here’s What the Quantitative Model Predicts:

Per the proven Zacks model, a company with a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has good chances of beating estimates if it also has a positive Earnings ESP.

Medtronic has a Zacks Rank #3, which increases the predictive power of ESP and an Earnings ESP of +0.09%, which raises confidence about a positive surprise. Together, the combination suggests that the company is likely to beat on earnings this period to be reported. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Conversely, we caution against the Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Other Stocks to Consider

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

Best Buy Co., Inc. (NYSE:BBY) has an Earnings ESP of +2.01% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

DXC Technology Company (NYSE:DXC) has an Earnings ESP of +0.53% and a Zacks Rank of 2.

Brady Corporation (NYSE:BRC) has an Earnings ESP of +1.03% and is a Zacks #2 Ranked player.

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