Medtronic's (MDT) Q4 Earnings and Revenues Lag Estimates

Medtronic plc MDT reported fourth-quarter fiscal 2022 adjusted earnings per share (EPS) of $1.52, which missed the Zacks Consensus Estimate by 2.6%. However, adjusted earnings increased 2% from the year-ago adjusted figure. Currency-adjusted EPS too came in at $1.52 for the quarter.

Without certain one-time adjustments — including restructuring and associated costs, amortization and restructuring expenses, acquisition-related costs and certain medical device regulation charges among others — GAAP EPS was $1.10, reflecting a 10% rise from the year-ago reported figure.

Full-year adjusted EPS was $5.55, missing the Zacks Consensus Estimate by 1.9% but exceeding the year-ago figure by 25.6%.

Total Revenues

Worldwide revenues in the reported quarter grossed $8.09 billion, up 1% on an organic basis (excluding the impacts of currency) but down 1% on a reported basis year over year. The top line also lagged the Zacks Consensus Estimate by 3.8%.

The Q4 results, according to the company, reflect the unfavorable market impact of temporary issues related to the global supply chain, particularly in Surgical Innovations, and China, due to the recent COVID-19 lockdowns.

Fiscal 2022 revenues were $31.69 billion, up 5% on both reported and organic basis from 2021. Fiscal revenues too lagged the Zacks Consensus Estimate by 1%.

Quarter in Details

In the quarter under review, U.S. sales (51% of total revenues) declined 2% year over year on a reported basis to $4.09 billion. Non-U.S. developed market revenues totaled $2.61 billion (32% of total revenues), depicting a 2% drop on a reported basis (up 4% on an organic basis).

Emerging market revenues (17% of total revenues) amounted to $1.38 billion, up 4% on a reported basis (up 7% organically).

Segment Details

The company currently generates revenues from four major segments, namely Cardiovascular Portfolio, Medical Surgical Portfolio, Neuroscience Portfolio, and Diabetes.

In the fiscal fourth quarter, Cardiovascular revenues rose 4.7% at CER to $2.96 billion, reflecting high-single-digit organic growth in Structural Heart & Aortic (SHA)and mid-single-digit organic growth in Cardiac Rhythm Management (CRM) and Coronary & Peripheral Vascular (CPV).

CRHF sales totaled $1.55 billion, up 4% year over year at CER. Revenues from SHA were up 8% at CER to $778 million. CPV revenues were up 4% at CER to $631 million.

Medtronic PLC Price, Consensus and EPS Surprise

Medtronic PLC Price, Consensus and EPS Surprise

Medtronic PLC price-consensus-eps-surprise-chart | Medtronic PLC Quote

In Medical Surgical, worldwide sales totaled $2.23 billion, down 1% year over year at CER. The quarter registered flat year-over-year organic results in Surgical Innovations (SI) offset by mid-single-digit organic declines in Respiratory, Gastrointestinal & Renal (RGR). Excluding the impact of ventilator sales, Medical Surgical fourth-quarter revenues were flat year over year organically.

In Neuroscience, worldwide revenues of $2.29 billion were up 2% year over year at CER, driven by mid-single-digit organic growth in Specialty Therapies and low-single-digit organic growth in Neuromodulation, partially offset by low-single-digit organic declines in Cranial & Spinal Technologies (CST).

Revenues at the Diabetes group dropped 5% at CER to $597 million as a high-twenties decline in the United States was partially offset by low-double-digit organic growth in non-U.S. developed markets and high-teens organic growth in emerging markets. The company reported international growth on mid-single-digit organic growth of durable insulin pumps, mid-teens organic growth in consumables, and low-twenties organic growth of continuous glucose monitoring (CGM) products.

Margins

Gross margin in the reported quarter expanded 36 basis points (bps) to 67.9% on a 2.3% fall in the cost of products sold to $2.59 billion. Adjusted operating margin contracted 6 bps year over year to 28.1%. Selling, general and administrative expenses dropped 0.9% to $2.57 billion. Research and development expenses increased 3.2% to $652 million.

Guidance

Medtronic initiated its fiscal 2023 financial guidance.

The company expects fiscal 2023 organic revenue growth in the band of 4% to 5%. If the recent foreign currency exchange rates hold, revenues would be negatively impacted by approximately $1.0 billion to $1.1 billion.

The current Zacks Consensus Estimate for fiscal 2023 revenues is pegged at $33.18 billion, indicating 3.7% year-over-year growth on a reported basis.

The company expects fiscal 2023 adjusted EPS in the range of $5.53 to $5.65, which includes an estimated 20% to 25% negative impact from foreign currency translation based on the recent rates. The Zacks Consensus Estimate is pegged at $5.79 share.

Our Take

Medtronic ended fiscal 2022 on a dull note with lower-than-expected top-and-bottom-line figures for both Q4 and the full year.The unfavorable market impact of temporary issues related to the global supply chain, particularly in Surgical Innovations, and China, due to the recent COVID-19 lockdowns deterred growth. According to Medtronic, China revenues, which represented 43% of Emerging Markets revenues, declined 10% as a result of COVID-19 lockdowns.

On a positive note, the company registered organic growth in the Cardiovascular and Neuroscience segments. Within Cardiovascular, CRHF, CPV and SHA each registered organic growth. The quarter’s gross margin showed improvements on a year-over-year basis.

Zacks Rank & Recent Releases

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

Some better-ranked stocks in the broader medical space that have announced quarterly results are Bio-Rad Laboratories, Inc. BIO, AMN Healthcare Services, Inc. AMN and Masimo Corporation MASI.

Bio-Rad, carrying a Zacks Rank #2 (Buy), reported first-quarter 2022 adjusted EPS of $4.94, which beat the Zacks Consensus Estimate by 76.4%. Revenues of $700 million outpaced the consensus mark by 3.3%. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Bio-Rad has a historical earnings growth rate of 31.2%. BIO’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 58.9%.

AMN Healthcare, sporting a Zacks Rank #1, reported first-quarter 2022 adjusted EPS of $3.49, which beat the Zacks Consensus Estimate by 7.4%. Revenues of $1.55 billion outpaced the consensus mark by 3.7%.

AMN Healthcare has an estimated long-term growth rate of 1.1%. AMN’s earnings surpassed estimates in the trailing four quarters, the average surprise being 15.6%.

Masimo reported first-quarter 2022 adjusted EPS of 93 cents, which surpassed the Zacks Consensus Estimate by 1.1%. Revenues of $304.2 million outpaced the Zacks Consensus Estimate by 3.6%. It currently carries a Zacks Rank #2.

Masimo has an earnings yield of 3.4% against the industry’s negative yield. MASI’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 4.4%.

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