Medtronic Shares Hit Fresh Record High as Q1 Earnings Beat Forecasts; Target Price $142

Medtronic shares hit a fresh record high on Tuesday after the medical device company reported better-than-expected earnings in the fiscal first quarter and lifted its full-year profit guidance.

The Dublin-based company said its first-quarter GAAP net income and diluted earnings per share (EPS) were $763 million and $0.56, respectively, increases of 57% and 56%, respectively. As detailed in the financial schedules included at the end of this release, first quarter non-GAAP net income and non-GAAP diluted EPS were $1.908 billion and $1.41, respectively, increases of 128% and 127%, respectively. That was higher than the Wall Street consensus estimates of $1.32 per share.

The company reported first-quarter worldwide revenue of $7.987 billion, an increase of 23% as reported and 19% on an organic basis, which excludes the $245 million benefit of foreign currency translation. That was higher than the market expectations of $7.8 billion.

Medtronic said the first-quarter results reflect a strong recovery from the impact of the COVID-19 pandemic on elective procedures that the company experienced in 2020.

The company expect revenue growth in its fiscal year 2022 to approximate 9% on an organic basis. If current exchange rates hold, revenue growth in the fiscal year 2022 would be positively affected by approximately $100 to $200 million.

The company increased its fiscal year 2022 diluted non-GAAP EPS guidance from the prior range of $5.60 to $5.75 to the new range of $5.65 to $5.75, including an estimated 5 to 10 cent positive impact from foreign currency exchange versus a 10 to 15 cent positive impact previously.

Following the upbeat results, Medtronic shares hit a fresh record high, rising over 3% to $132.66 on Tuesday. The stocks have gained over 17% so far this year.

Executive Comments

“We’re reiterating our revenue guidance for the year while increasing the lower end of our EPS range on the back of our first-quarter results,” said Karen Parkhill, Medtronic chief financial officer.

“We remain focused on accelerating our long-term revenue growth and generating strong returns for our shareholders. In addition to growing our dividend, we are increasing our investments at the front end of major product launches, growing our R&D spend broadly across the company, and executing disciplined tuck-in acquisitions.”

Analyst Comments

“Medtronic (MDT) reported F1Q revenue and EPS of $7.99B and $1.41 compared to Street targets of$7.87B and $1.32 and our estimates of $7.83B and $1.31. Organic sales growth was 19%, exceeding guidance of 17%-18%. For fiscal 2022, MDT continues to expect organic sales growth of 9%. The company raised the low end of its full-year EPS guidance range and now targets $5.65-$5.75 compared to $5.60-$5.75 previously,” noted Joshua Jennings, equity analyst at Cowen.

“For fiscal 2022, the company continues to forecast organic sales growth of 9% despite the unknowns posed by COVID-19 and specifically, the Delta variant. This target was approximately 100 bps ahead of expectations when it was set, and we were not expecting MDT to increase what is already a sufficiently high growth estimate. As such, we believe the reiteration of the full-year sales guidance is favourable and will be well-received by investors.”

Medtronic Stock Price Forecast

Sixteen analysts who offered stock ratings for Medtronic in the last three months forecast the average price in 12 months of $142.73 with a high forecast of $150.00 and a low forecast of $135.00.

The average price target represents a 7.15% change from the last price of $133.20. From those 16 analysts, 14 rated “Buy”, two rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $140 with a high of $158 under a bull scenario and $104 under the worst-case scenario. The firm gave an “Overweight” rating on the medical device company’s stock.

Several other analysts have also updated their stock outlook. BTIG raised the target price to $137 from $135. Guggenheim lifted the price target to $145 from $135. Oppenheimer upped the price target to $147 from $134.

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