Medtronic (MDT) to Report Q4 Earnings: Will It Top Estimates?

Medtronic plc MDT is scheduled to report fourth-quarter and fiscal 2019 results on May 23, before the opening bell.

In the last reported quarter, the company’s earnings beat the Zacks Consensus Estimate by 4.03%. In fact, the bottom-line outpaced estimates in the trailing four quarters, the average being 4.84%.

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

Key Catalysts

We are upbeat about Medtronic’s successful execution of growth strategies such as therapy innovation, globalization and increase in economic value. Combined with the demographics of an aging population, these positives opened up opportunities for the company, which should get reflected in the fiscal fourth-quarter results.

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

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There has been a consistent and gradually stabilizing trend in the global cardiac rhythm and heart failure ("CRHF") market. 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, banking on product launch and creation of meaningful markets.

Strong demand for the company's suite of quadripolar cardiac resynchronization therapy-pacemakers has been driving Heart Failure division revenues.

However, in the fourth quarter, this growth can be offset by a decline in sales of left ventricular assist device (LVAD) as a result of market share loss (due to the regulatory approval of Abbott’s competitive product HeartMate 3) and certain unfavorable changes in heart transplant guideline.

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 continued uptake of Micra Transcatheter Pacing System and the Azure next generation family of pacemakers.

Within Coronary & Structural Heart, the company is expected to gain from solid demand for CoreValve Evolut PRO globally.

Moreover, the Aortic, Peripheral & Venous division is expected to gain from strength in IN.PACT Admiral drug-coated balloon, Valiant Navion thoracic stent graft and solid growth in VenaSeal closure system. Notably, Medtronic has been continuously seeing strong demand for the IN.PACT Admiral drug-coated balloon in Japan since its commercial launch last August. 

Overall, the Zacks Consensus Estimate for CVG revenues in the fiscal fourth quarter is pegged at $3.09 billion, indicating 1.6% drop from the year-ago number.

Within Restorative Therapies Group ("RTG"), the company is again projected to register robust progress, particularly in Brain & Pain divisions, despite challenges in the Spine market.

Medtronic’s integrated robotics and navigation platform Mazor X Stealth is expected to drive growth in Neurosurgery business along with creating demand for core spine implants.

The Zacks Consensus Estimate for RTG revenues in the fiscal fourth quarter is pegged at $2.15 billion, implying 7.5% improvement from the last reported quarter.

Within Minimally Invasive Therapies Group ("MITG"), the company is once again expected to deliver robust performance banking on strong sales of portable hemodialysis system as well as the next generation capsule endoscopy product called PillCam Genius.

The Zacks Consensus Estimate for MITG revenues in the fiscal fourth quarter is pegged at $2.24 billion, suggesting 5.6% improvement from the last reported quarter.

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. The company is continuing with the launch of MiniMed 670G in some European countries. This should continue to boost international diabetes revenues. However, difficult year-over-year comparisons in U.S. pump sales may dent growth in the to-be-reported quarter.