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Medtronic's (MDT) Global Market Share Strong, FX Headwind Stays

Medtronic’s MDT major business groups have been reporting consistent market share gains, which highlight sustainability across groups and regions. Yet, unfavorable currency movements have been a dampener over the last few quarters. The stock carries a Zacks Rank #3 (Hold).

Medtronic is expanding the global foothold of its Cardiovascular business (consisting of more than 36% of the company’s total revenues in fiscal 2022). Within Cardiovascular, cardiac rhythm management, one of Medtronic’s largest businesses, continued to build on the company’s category leadership. Medtronic’s pacing business continued to outperform the market banking on strong global growth of the Micra leadless pacemaker family as it enters new geographies and expands in existing markets.

Micra grew 14% in the fiscal third quarter. Further, ICDs (Implantable cardioverter-defibrillator) within cardiac rhythm management grew 7% year over year as replacement headwinds moderated. The company is expected to gain significant market share with the latest CE Mark for its Aurora Extravascular ICD. The company currently expects the U.S. approval of the same in the next calendar year.

Within Structural Heart, the company looks forward to market share gain on strong Transcatheter aortic valve replacement (TAVR) prospects. According to Medtronic, TAVR is one of the largest growth drivers for the company and it expects the market, which is roughly $5.5 billion today, to exceed $7 billion within the next three years and reach $10 billion in the next five years. In the fiscal third quarter, despite healthcare staffing challenges and COVID in Japan, this business recorded 11% year-over-year growth, including 12% growth in the United States, led by the full-market release of its next-generation TAVR Evolut FX valve in October.

Medtronic PLC Price

Medtronic PLC Price
Medtronic PLC Price

Medtronic PLC price | Medtronic PLC Quote

On the flip side, Medtronic noted that while the impact of the COVID resurgence has diminished, in several of its markets, supply constraints recovery is slow. With regard to procedural volumes, in addition to incremental China VBP, the company is still seeing lower volumes in elective coronary PCI, GI procedures, TAVR, spinal cord stim and some less emergent surgical procedures. The slower-than-anticipated recovery in procedural volumes primarily occurred in developed markets as healthcare systems continued to work through staffing and other challenges.

Like its peers, Medtronic is currently affected by the industry-wide inflationary concern with increased freight expense. The company in this regard noted that the full impact of inflation on its raw material and direct labor costs would be realized over the next couple of quarters with the inventory rolling off the company’s balance sheet. This will affect the gross margin.

With Medtronic recording a significant portion of its sales from the international market, it remains highly exposed to currency fluctuations. On the fiscal third-quarter earnings call, Medtronic noted that fiscal 2023 adjusted earnings would be negatively impacted by approximately 21 cents from adverse currency translation.

Key Picks

Some better-ranked stocks in the broader medical space are Addus Homecare Corporation ADUS, Merit Medical Systems, Inc. MMSI and Davita Inc DVA.

The Zacks Consensus Estimate for Addus Homecare’s 2023 earnings indicates 10.9% year-over-year growth. The Zacks Consensus Estimate for ADUS’s 2023 earnings has moved 0.5% north in the past 30 days.

Addus Homecare has a long-term estimated growth rate of 11.8%. It currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Merit Medical reported first-quarter 2023 adjusted EPS of 64 cents, beating the Zacks Consensus Estimate by 16.4%. Revenues of $297.6 million surpassed the Zacks Consensus Estimate by 5.9%. It currently carries a Zacks Rank #2.

Merit Medical has a long-term estimated growth rate of 11%. MMSI’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 20.2%.

DaVita, carrying a Zacks Rank #2 at present, has a long-term estimated growth rate of 14.6%. DVA’s earnings surpassed estimates in three of the trailing four quarters and missed in one, the average surprise being 17.3%.

DaVita has lost 1.9% compared with the industry’s 18% decline over the past year.

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Medtronic PLC (MDT) : Free Stock Analysis Report

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