[Updated: Nov 29, 2021] Medtronic Earnings Update
medtronic recently reported its Q2 FY22 results, which were mixed with revenue down slightly, and earnings in excess of our estimates. The company reported sales of approximately $7.8 billion (up 3% year-over-year) compared to our estimate of $8.0 billion. While the Cardiovascular and Neuroscience segment revenue grew more than 3%, the Medical Surgical segment sales grew less than 1%. The company’s management said that the impact of Kovid-19 was greater than before. Our Dashboard is on Medtronic’s Revenue The company provides more details on the segment.
Looking at the bottom line, the company reported adjusted earnings of $1.32 per share, compared to $1.02 in the prior year quarter. Earnings were slightly above our forecast of $1.30 per share and the consensus estimate of $1.29 per share. The company saw 470 bps operating margin expansion, fueling overall earnings growth.
After a mixed performance in Q2FY22, Medtronic lowered its full-financial outlook, with revenue now forecast to grow between 7% and 8% compared to its prior guidance of 9% growth. However, the company reaffirmed its earnings outlook of $5.65 to $5.75.
We have also updated our model after the Q2 release. We maintain sales forecast of approximately $33 billion in fiscal year 2022, with Medtronic 780G insulin pumps and its continuous glucose monitoring system – Guardian 4 (currently awaiting regulatory approval) to see a strong uptick . We also expect EPS to be at $5.71, compared to $4.43 in fiscal 2021, and near the mid-point of the company’s provided range. In view of these changes to our forecasts, we have revised our Medtronic Valuation Based on $144 per share, $5.71 expected adjusted EPS and a 25x P/E multiplier for fiscal 2022, represents 26% up from its current level of $114, which means that MDT stock’s current valuation has not been done and is likely to see higher levels. In the near term, in our view.
[Updated: Nov 19, 2021] Medtronic Q2 FY22 Earnings Preview
Medtronic Stock (NYSE:MDT) is scheduled to report its fiscal second-quarter results on Tuesday, November 23. We expect Medtronic to generate revenue and earnings largely in line with consensus estimates. The company is likely to benefit from improved demand for medical devices with a rebound in elective surgery volume, a trend seen with other medical device companies as well. However, the rise of the delta variant, and its effects on overall health services in certain geographies, may impact overall earnings growth.
Medtronic said in its Q1 earnings conference call that it is seeing a slowdown in the total volume of processes entering Q2. That said, we expect the company to navigate the latest quarter well due to the economic recovery and rising demand for medical devices. In addition, Trefis’ forecast indicates that Medtronic is valued at $149 per share, which is 27% higher than the current market price of approximately $118, which means the stock is undervalued in our view. Our interactive dashboard analysis Medtronic’s prior earnings There is additional detail.
(1) Revenue is expected to be in line with the consensus estimate
Trefis estimates Medtronic’s Q2 fiscal year 2022 total revenue to be approximately $8.0 billion, which is in line with consensus estimates. While the COVID pandemic had a huge impact on sales of medical devices, improved demand, coupled with a rebound in the volume of procedures, likely helped the company navigate the quarter well. In Q1 fiscal year 2022, the company posted a solid 23% year-on-year growth in revenue, led by 29% growth in Neuroscience as well as Medical Surgical business, while Cardiovascular segment sales grew 19%, And this trend may continue, albeit at a slower pace given the impact of the delta version on overall processes volume. Our Dashboard is on Medtronic’s Revenue Provides more details on segment-wise revenue breakup.
2) EPS is likely to be in line with consensus estimates
Medtronic’s Q2 fiscal 2022 earnings per share is expected to be $1.30 per Trefis analysis, which is in line with the consensus estimate of $1.29. Medtronic’s non-GAAP net income of $1.9 billion in Q1 fiscal 2022 reflects a sharp increase of 2.3x from its profit of $836 million in the prior year quarter, primarily driven by increased revenue as well as operating expenses. With net margin of over 1000 bps. Growing slower than revenue. Looking at the full fiscal year 2022, we expect a 30% year-on-year growth in EPS to $5.75 compared to $4.43 in fiscal 2021.
(3) The stock price is estimated to be 27% higher than the current market price
going by us Medtronic Valuation, with an EPS estimate of about $5.75 in fiscal year 2022 and a P/E multiplier of 26x, this translates to a price of $149, which is 27% higher than the current market price of about $118. In fact, at its current level of $118, MDT stock is trading at 20 times its forward full-year earnings, and that compares to nearly 30x the level seen recently as of late 2020, which Meaning the stock has more room for growth.
Note: P/E multiples are based on year-end share price, and reported (or expected) adjusted earnings for the full year.
While MDT stock looks like it could be turning a profit, 2020 has created several pricing discontinuities that could provide lucrative trading opportunities. For example, you’d be surprised how intuitive it is to approach stock valuations. Mettler vs Abbott,
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Returns Nov’21 MTD  YTD  2017-21 
MDT Return -9% -5% 56%
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Trefis MS Portfolio Returns -3% 46% 297%
 Month-to-date and Year-to-date as of 11/29/2021
 Cumulative Total Return since 2017
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