What Investors Can Expect from Medtronic

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Part 2
What Investors Can Expect from Medtronic PART 2 OF 15

Medtronic Expected to Report Small Drop in Revenues in Fiscal 2018

Revenue contribution by geography

Medtronic (MDT) reported sales of $4.0 billion from the US market in 1Q18, which was year-over-year (or YoY) growth of 1% on a reported as well as an operational basis. The non-US developed markets, mainly Japan and Western Europe, contributed approximately $2.3 billion to Medtronic’s revenue performance in 1Q18, which is 4% YoY growth on a reported basis and 5% YoY growth on an operational basis. The company also reported revenues close to $1.0 billion from emerging markets in 1Q18, which is 11% YoY growth on a reported basis and 12% YoY growth on an operational basis. This double-digit growth was mainly driven by robust demand trends in markets such as Southeast Asia, China, the Middle East, Africa, and Latin America. To know more about Medtronic’s emerging markets business, please refer to Medtronic’s Emerging Market Position and Opportunities for Fiscal 2018.

In 1Q18, unfavorable foreign exchange fluctuations affected Medtronic’s revenue growth by 50 basis points, while targeted acquisitions benefitted the company’s revenue growth by 140 basis points.

Medtronic Expected to Report Small Drop in Revenues in Fiscal 2018

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Small drop in revenues

Wall Street analysts have projected Medtronic’s fiscal 2018 revenues to be about $29.5 billion, which will be a YoY decline of around 0.8%.

Peers Boston Scientific (BSX), Edwards Lifesciences (EW), and Abbott Laboratories (ABT) are expected to earn revenues close to $8.9 billion, $3.4 billion, and $26.5 billion, respectively, in 2017.

IT disruptions

In 1Q18, Medtronic’s revenues and earnings per share (or EPS) were affected non-materially due to information technology (or IT) disruptions. On June 19, 2017, a disruption in the IT system, a result of an inadvertent human error, affected Medtronic’s ability to manufacture products as well as process and ship orders on a global basis. This disruption didn’t involve external players, nor did it lead to any unwanted data exposures or compromises. The company managed to resolve this issue by June 24, 2017.

However, if such IT lapses continue, it could have a negative impact on the stock prices of Medtronic as well as those of the Vanguard Dividend Appreciation ETF (VIG). Medtronic makes up about 3.1% of VIG’s total portfolio holdings.

In the next article, we’ll discuss margin growth trends for Medtronic in 2017.


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