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Medtronic Beats Earnings Estimates, Misses Revenue Estimates

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Fiscal 1Q18 takeaways

Medtronic (MDT) reported its fiscal 1Q18 earnings on August 22, 2017. In 1Q18, Medtronic reported revenue of $7.4 billion and diluted adjusted EPS (earnings per share) of $1.12. While the earnings results came in ahead of analysts’ estimate of $1.08, the revenue results for the quarter came in below analysts’ estimate of $7.5 billion.

Medtronic’s EPS in fiscal 1Q18 exceeded Wall Street analysts’ estimate. The company’s EPS represented YoY (year-over-year) growth of around 3% in the quarter, and 4% on a constant currency basis. A robust operational structure, cost improvements, double-digit emerging market growth, and acquisitions drove the company’s earnings in 1Q18.

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Revenue estimates

In fiscal 1Q18, Medtronic earned revenue of ~$7.4 billion, representing YoY growth of 3%. The company failed to meet analysts’ revenue estimates due to temporary diabetes segment headwinds from sensor supply constraints and IT (information technology) system disruption. The results also failed to meet the company’s guidance of $7.5 billion in revenue, which represented reported revenue growth of 4% YoY.

However, Medtronic reported a solid operating margin improvement of around 50 basis points in 1Q18. On an organic basis, the company reported an operating margin improvement of 70 basis points.

Peers and ETFs

In their most recent quarters, peers Boston Scientific (BSX), Zimmer Biomet (ZBH), and BD (BDX) registered revenue of about $2.3 billion, $2 billion, and $3 billion, respectively.

Investors seeking to participate in the growth potential of Medtronic while diversifying company-specific risks could consider the iShares Russell 1000 Value ETF (IWD). Medtronic accounts for about 0.85% of IWD. In the next part of this series, we’ll look at Medtronic’s stock price reaction after the company’s 1Q18 earnings announcement.

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