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Medtronic's All Business Lines Grow Despite Cost Concerns

Zacks Equity Research

On Sep 27, we issued an updated research report on Medtronic plc MDT. Increased adoption of the company's globally accepted advanced therapies is encouraging. The stock has a Zacks Rank #2 (Buy).

Over the past year, shares of Medtronic have outperformed the industry. The stock has returned 9.2% versus the industry's 4% decline.

Of late, Medtronic’s major business groups strongly contributed to its top-line growth at CER, highlighting sustainability across groups and regions in addition to displaying achievement of its synergy targets.

In the first quarter of fiscal 2020, within Restorative Therapies Group (RTG), the neurosurgery business was robust, led by a strong uptake of Mazor X Stealth navigated robotic system.

Within Cardiac & Vascular Group (CVG), despite the ongoing challenges, multiple product lines showed exceptional strength in the quarter with high single-digit growth from Reveal LINQ insertable loop recorder as well as Arctic front cryoablation. Double-digit growth was witnessed in VenaSeal Closure System and TYRX absorbable antibacterial envelope.

The Minimally Invasive Therapies Group (MITG) arm demonstrated sturdy growth in the reported quarter owing to a solid uptick in Advanced Stapling and Advanced Energy. Further, the company overcame concerns related to a supplier’s sterilization facility shutdown in February by returning to full sterilization capacity during the quarter.

Medtronic PLC Price

Medtronic PLC Price

Medtronic PLC price | Medtronic PLC Quote

Within Diabetes group, International business grew 20%, banking on a strong rollout of the MiniMed 670G in the new markets. In addition, the company is experiencing a strong adoption of the Guardian Connect Smart CGM system, which rose in the high 80s during the reported quarter. In fiscal 2020, Medtronic expects to launch its MiniMed 780G (its advanced hybrid closed-loop system with bluetooth connectivity).

We are currently hopeful about the company's newly-unveiled restructuring initiative called Enterprise Excellence plan, aimed at $3-billion annual growth run rate savings by the end of fiscal 2022. Per the company, this new program has been designed to increase its effectiveness, enable reinvestment for growth, and drive consistent margin expansion as well as EPS leverage.

On the flip side, the company has been grappling with steep costs and expenses, which weigh heavily on its bottom line.

Other Key Picks

A few other top-ranked stocks in the broader medical space are Valeritas Holdings, Inc VLRX, GW Pharmaceuticals PLC GWPH and Neurotrope, Inc NTRP.

Valeritas has a Zacks Rank of 2 and a projected third-quarter 2019 earnings growth rate of 40.5%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

GW Pharmaceuticals estimates third-quarter earnings growth rate to be 65.5%. It currently flaunts a Zacks Rank #1.

Neurotrope is Zacks #2 Ranked and has an expected third-quarter earnings growth rate of 31.9%.

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Medtronic PLC (MDT) : Free Stock Analysis Report
 
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