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Medtronic (MDT) Demonstrates Global Growth Amid Cost Concerns

Zacks Equity Research

On Apr 7, we issued an updated research report on Medtronic plc MDT. Increased adoption of the company's globally-accepted advanced therapies is encouraging. The stock currently carries a Zacks Rank of 3 (Hold).

Over the past year, shares of Medtronic have outperformed the industry. As per the last share-price movement, the stock has rallied 5.7% as against the industry's 11.5% fall.

All major business groups at Medtronic registered solid top-line growth at CER in the third quarter of fiscal 2020. This highlighted sustainability across the company’s groups and regions, as well as the successful achievement of synergy targets. Within the Restorative Therapies Group (RTG), stellar sales at Specialty and Brain therapies offset sluggish growth in Pain therapies. The Neurosurgery business recorded double-digit growth at all three of the company’s offerings — Robotics, Navigation and Imaging.

Medtronic PLC Price

Medtronic PLC Price

Medtronic PLC price | Medtronic PLC Quote

Within Cardiac & Vascular Group (CVG), the company recorded 1.8% growth at CER despite the prevalent challenges. On visible signs of overcoming these headwinds, we expect a rebound in this trend any time soon. Meanwhile, multiple product lines within Pacing and TAVR displayed strength during this period. The Minimally Invasive Therapies Group (MITG) arm demonstrated sturdy growth on strength in Surgical Innovations (SI) and the Respiratory, Gastrointestinal & Renal (RGR) divisions.

Within the Diabetes group, International business registered solid mid-teen growth on the continued adoption of MiniMed 670G in overseas markets. The company has been witnessing strong enrolment in its Next Tech Pathway program, which enables purchasers of the MiniMed 670G to upgrade its next-generation pump free of cost.

In addition, the company witnessed double-digit growth in CGM and other consumables in the fiscal third quarter. In fiscal 2020, Medtronic expects to launch its MiniMed 780G (advanced hybrid closed-loop system with bluetooth connectivity).

Nonetheless, the company’s CVG revenues missed expectations due to a decline in customer purchasing during the period under consideration. The below-market growth rate of the company’s U.S. TAVR business also thwarted the segment’s revenues. In the Diabetes group, the U.S. business declined in low double-digits due to competitive challenges.

Further, escalating costs and expenses have been persistently straining margins. Unfavorable currency movement also hurt the company’s growth during the fiscal fourth quarter. The choppy macroeconomic conditions due to the coronavirus outbreak are concerning as well.

Key Picks

Some better-ranked stocks from the broader medical space are ResMed Inc. RMD, National Vision Holdings, Inc. EYE and Phibro Animal Health Corporation PAHC.

ResMed has a projected long-term earnings growth rate of 14.4%. It currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

National Vision’s long-term earnings growth rate is estimated at 10.7%. The company presently has a Zacks Rank of 2.

Phibro’s long-term earnings growth rate is estimated at 2.1%. The stock currently holds a Zacks Rank #2.

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