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Should You Add Medtronic to Your Watchlist for 2022?

A global leader in medical technology, Medtronic’s (MDT) differentiated portfolio of medical devices and increased international market penetration have boosted investor confidence in the stock. Given the company’s robust revenue growth across all segments and the pent-up demand for elective surgeries, let’s find out if this is wise to add the stock to your watchlist.

Leading medical technology company Medtronic plc (MDT) manufactures and sells therapeutic and diagnostic medical devices and products. The Dublin-based company’s innovative therapies in Cardiovascular and Medical-Surgical portfolio, tailored to the needs of its patients, as well as accelerated sales of continuous glucose monitors (CGMs) products and specialty therapies, have helped it maintain a robust balance sheet.

Also, MDT is well-positioned to benefit from the recent decision of the U.S. Centers for Medicare & Medicaid Services (CMS) to expand medical coverage for all types of CGM. Closing its last trading session at $103.45, MDT is trading 23.9% below its 52-week high of $135.89.

The FDA clearance for the medical device company’s INVOS™ 7100 system and the Canadian license for its Hugo robotic-assisted surgery (RAS) system should bolster its sales. Despite a series of pandemic-induced setbacks, pent-up demand for elective surgical procedures and the launch of new products in international markets should help MDT further improve its profit margin.

Here’s what could shape MDT’s performance in the coming months:

Favorable Analyst Estimates

Analysts expect MDT’s EPS to increase 6.2% year-over-year to $1.37 in the current quarter ending January 2021. Its consensus EPS estimates indicate a 28.2% increase in the current year and an 8.4% increase next year. MDT has an impressive earnings surprise history, as it beat Street EPS estimates in each of the trailing four quarters.

The consensus revenue estimate of $8.57 billion for the next quarter ending March 2022 indicates a 4.7% improvement year-over-year. Also, its revenue is estimated to increase 7.5% in fiscal 2022 and 5.3% in 2023.

Products Receive Approval in International Markets

Last month, the U.S. Food and Drug Administration (FDA) granted 510(k) clearance for MDT’s INVOS 7100 cerebral/somatic oximetry system for infants and children. This would allow clinicians to treat vulnerable pediatric patients better and help improve outcomes. The company plans to launch it for commercial use in spring 2022.

On December 7, 2021, MDT’s Canadian subsidiary Medtronic Canada ULC announced that it had received a Health Canada license for the Hugo robotic-assisted surgery (RAS) system. The license would enable the Irish medical device company to deliver the benefits of robotic-assisted surgery to more patients in Canada.

Medical Devices Industry Tailwinds

The global medical devices market is expected to reach $657.98 billion in 2028 growing at a CAGR of 5.4%. Technological advancements in robot-assisted surgeries and increasing investments in minimally invasive procedures are expected to keep driving the industry's growth. Although COVID-19 dealt a blow to medical technology companies like MDT as elective surgeries got postponed and labor shortages in hospitals impacted medical device procedure volumes, the rebound of pent-up demand for surgeries and procedural care in 2022 and growing adoption of advanced therapies should bolster the company’s revenue.

Robust Financial Performance across All Segments

MDT’s Cardiovascular revenue increased 4% year-over-year to $2.83 billion in the fiscal second quarter ended October 29, 2022. This was primarily driven by 7% organic growth in Coronary & Peripheral Vascular revenue and 3% growth in Cardiac Rhythm & Heart Failure revenue. The company’s surgical innovations revenue was $1.5 billion, representing an increase of 7.5% year-over-year. Under the Neuroscience segment, MDT’s specialty therapies revenue came in at $634 million, up 9.1% on a reported basis compared with the first quarter of 2020.

POWR Ratings Show Promise

MDT has an overall rating of B, which translates to Buy in our POWR Ratings system. The POWR Ratings are calculated by taking into account 118 different factors, with each factor weighted to an optimal degree. 

Our proprietary rating system also evaluates each stock based on eight different categories. MDT has a Growth grade of B, consistent with analysts’ expectation that its revenue and earnings will grow.

Also, in terms of Stability grade, MDT has a B. The stock’s relatively low beta of 0.81 is in sync with this grade.

Click here to see the additional POWR Ratings for MDT (Value, Sentiment, Quality, and Momentum).

The stock is ranked #17 of 169 stocks in the D-rated Medical – Devices & Equipment industry.

Bottom Line

MDT’s robust performance across its broad pipeline of leading medical technology and high hopes for its recently approved medical devices should help the company witness long-term growth. Pent-up demand for surgical procedures and CMS’ efforts to expand medical coverage for CGMs should drive greater demand for its innovative products. So, it could be wise to bet on the stock now.

How Does Medtronic plc Stack Up Against its Peers?

MDT has an overall B rating in our proprietary rating system. Check out these other stocks within the Medical – Devices & Equipment industry with an A (Strong Buy) rating: ICU Medical, Inc. (ICUI), Electromed, Inc. (ELMD), and Fonar Corporation (FONR).

MDT shares were unchanged in after-hours trading Monday. Year-to-date, MDT has declined -7.48%, versus a 29.47% rise in the benchmark S&P 500 index during the same period.

About the Author: Imon Ghosh

Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization.


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