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Will Medtronic Beat Analysts’ Revenue Estimates in 4Q16?

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Medtronic’s revenue estimates

On May 31, 2016, Medtronic (MDT) will announce its fiscal 4Q16 earnings for the period ending April 30, 2016. Wall Street has estimated the company’s 4Q16 revenues to be about $7.5 billion, which would represent a rise of around 2.5% on a YoY (year-over-year) basis. The revenues in the last quarter were reported to be around $6.9 billion.

In 3Q16, Medtronic’s comparable constant currency sales growth came in at 6%. 3Q16 revenues were dragged down by a negative foreign exchange impact of $344 million. Medtronic expects 4Q16 sales to grow in the range of 5% to 5.5% on a comparable constant currency basis and have a negative foreign exchange impact of around $180 million to $220 million due to the strong US dollar.

revenue estimate vs actuals

In the above graph, we can see a comparison of analyst estimates and the actual reported revenue in the previous quarters. In 3Q16, Medtronic’s actual revenues failed to meet analyst expectations largely due to the foreign currency impact along with the decline in spine and neuromodulation sales.

The foreign exchange impact and the slow spine and neuromodulation sales are expected to affect Medtronic’s 4Q16 revenues as well. However, the company’s strong product portfolio, significant free cash flows, and robust business model will partially offset these factors and drive revenue growth.

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Major competitors

Among Medtronic’s major competitors, Johnson & Johnson (JNJ) registered a YoY revenue decline of approximately 4.6%, whereas Stryker (SYK) and Becton Dickinson (BDX) witnessed revenue growth of 4.9% and 44.6%, respectively, in the recent quarter.

Investors seeking diversified exposure to Medtronic can consider investing in the iShares Core S&P 500 ETF (IVV). Medtronic accounts for around 0.64% of the total holdings of IVV.

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