MEDTRONIC STREET WRAP: Shares Fall Amid Scrutiny on Margins
(Bloomberg) -- Medtronic shares fall the most in 2 months after 4Q margins missed estimates. Some analysts say better-than-expected EPS and rev. support strength of core business.
- MDT 4Q adj. EPS $1.27 vs est. $1.26; 4Q rev. $7.57b vs est. $7.49b; 4Q adj. oper. margin 30.3% vs est. 31.2% (avg of 4 analysts surveyed by BFW); FY17 EPS forecast of $4.60-$4.70 vs est. $4.70
BTIG (Sean Lavin)
- Operating results seen as “somewhat lackluster”
- Non-GAAP gross margin 68.8% missed est. 69.8%, magnitude of miss seen as surprising
- Buy, PT $82
RBC (Glenn Novarro)
- 4Q rev. beat led by strength in CRM, Structural Heart, and Minimally Invasive Therapies divisions
- Initial FY17 forecast “as expected,” looks conservative given strength in core business and Covidien-related cost savings
- 4Q operating margin of 30.3% missed ests. and MDT’s forecast; excluding FX, would have been ~31.8%
- Outperform, PT $87
LEERINK (Danielle Antalffy)
- 4Q results and FY17 outlook “basically in-line” with ests
- Gross and operating margins missed ests. again, could underscore investor concerns about operating leverage targets
- Notes MDT faces headwinds, competition in 2H FY17
- Market perform, PT $82
COWEN (Joshua Jennings)
- 5 consecutive qtrs of rev. growth near/above top of forecast, excluding FX, supports “seamless” integration of Covidien
- FY17 seen as strong; Cowen expects rev. ests. to be increased to reflect weakening USD
- Softness in operating margin will be overshadowed by strength in underlying fundamentals as seen by strong 4Q and FY17 view
- Outperform, PT $94
EVERCORE ISI (Vijay Kumar)
- FY17 EPS forecast seen “generally in-line” with mgmt commentary on 3Q call; says avg analyst est. may not have accounted for FX hedging
- Sees FY17 rev. forecast of 5%-6% growth as above investor expectations and “major point” in assuring growth is sustainable
- Buy, PT $83
DATA
- MDT down as much as 2.4%, biggest intraday drop since March 17
- Shares had risen 6.2% YTD through Friday
- Stock has 21 buys, 5 holds; avg PT $87: Bloomberg data
RELATED
- Earlier, Medtronic EPS View Midpoint Below Est.; 4Q Oper. Margin Misses
- Medtronic Operating Margin Misses; Buyback May Help: 4Q Review From Bloomberg Intelligence
- BI Key Earnings Metrics Analyzer
- Link to earnings conf. call transcript
Alert:
HALISTERSource: BFW (Bloomberg First Word)
Tickers MDT US (Medtronic PLC)
People Danielle Antalffy (Leerink Partners LLC)
Glenn Novarro (RBC Capital Markets)
Joshua Jennings (Cowen & Co LLC)
Sean Lavin (BTIG LLC)
Vijay Kumar (Evercore Partners Inc)
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