Medtronic Stock Earnings Guidance Lowered for Q2 FY 2023

Medtronic Stock

Medtronic Stock (MDT:NYE) Analysis:

Last Closing Price: $76.48

Consensus Analyst Rating: Hold

12-Month Price Target: $94.93

Market CAP: $105.24 Billion

 

Medtronic stock (MDT:NYE) shares dipped lower in pre-market trading on Tuesday after the company cut its full-year earnings guidance in its Q2 financial report for fiscal 2023, citing unfavorable currency impact.

The reported revenue for the quarter decreased 3% year-over-year to $7.6 billion, falling short of expectations due to a $457 million negative impact from foreign currency translation.

Despite slower supply recovery or procedure volumes and pricing pressure from mass procurements in China, revenue climbed 2% YoY on an organic basis.

Ahead of the earnings call, CEO Geoff Martha stated, “Slower-than-anticipated procedural and supply recovery led to revenue below our estimates this quarter.” He described the steps taken to improve overall performance, such as simplifying the company’s structure and consolidating the supply chain.

Respiratory, Gastrointestinal, and Renal (RGR) divisions underperformed, causing Medical Surgical sales to fall short of analyst estimates by 10% YoY to $2.1 billion. However, the segment’s organic revenue decreased by only 1% year-over-year, excluding the impact of ventilator sales, in response to stronger COVID-driven demand last year.

Despite a 2% YoY dip, Cardiovascular revenue reached $2.8 billion in line with analyst projections, while Neuroscience revenue climbed 2% YoY to $2.2 billion, beating Wall Street’s expectations. Despite the lack of new product approvals, Diabetes sales exceeded analysts’ expectations, reaching $556 million with a 5% YoY drop.

Geographically, the United States led sales growth with a 2% YoY increase to produce $4.1B, but revenue from non-U.S. developed regions decreased 13% YoY to generate $2.2B.

Non-GAAP gross margin for the period decreased to 67.6% from 68.2% in the prior year period, while GAAP net income for the quarter decreased 67% YoY to $427M due to a $764M income tax reserve adjustment reflecting a previously reported court ruling.

Medtronic stock (MDT) cut its full-year non-GAAP EPS expectations to $5.25 – $5.30 from the previous range of $5.53 – $5.65 and the consensus estimate of $5.53. The foreign currency impact was 18 cents.

However, the business anticipates its growth to accelerate in the second half of fiscal year 23 to 3.5% – 4.0% on an organic basis, while increasing the expected negative FX effect from $1.4B – $1.5B to $1.74B – $1.84B.

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