Medtronic plc MDT is gaining from the launch of globally-accepted advanced therapies. However, unfavorable currency movement and global economic uncertainties continue to affect Medtronic. The stock currently carries a Zacks Rank #3 (Hold).

Over the past year, Medtronic has outperformed the industry. The stock has declined 17.8% compared with the industry’s 23% decline.

Medtronic registered organic growth in the Cardiovascular, Neuroscience and Diabetes segments in the third quarter of fiscal 2022. Within Cardiovascular, cardiac rhythm management, one of Medtronic’s largest businesses, continued to build on the company’s category leadership, adding over 1.5 points of share. In the medical surgical portfolio, the company gained share in GI, driven by momentum from the recently launched Emprint HP Generator and Beacon endoscopic ultrasound franchise.

In Respiratory Interventions, despite the year-over-year headwind, as ventilator sales continue to return to pre-pandemic levels, Medtronic gained about 400 basis points of share in the last reported quarter. In the neuroscience portfolio, the company gained market share in Cranial and Spinal technologies.

From a geographic perspective, emerging markets (18% of total revenues) were relatively stronger compared to U.S. and non-U.S. development markets, growing 7% year over year, on strength in South Asia, Latin America and the Middle East, and Africa.

Medtronic PLC Price

Medtronic PLC price | Medtronic PLC Quote

The quarter’s gross and operating margins showed improvements on a year-over-year basis. The fourth quarter of fiscal 2022 revenue guidance, indicating 4.37% year-over-year growth on a reported basis, instills investors’ optimism.

Since the start of fiscal 2022, Medtronic has been witnessing a strong recovery and displayed a return to growth. This recovery is not just driven by the recovery from the pandemic but also by the strong new product flow that Medtronic is bringing to the market over this period. Further, the increasing instances of tuck-in M&As and the implementation of a new operating model should add to the recovery momentum.

Although the pace of recovery from COVID-19 disruption was dented in the fiscal third quarter on the emergence of the Omicron variant, Medtronic noted an improvement in procedure volumes from the first few weeks of February. The company’s fourth-quarter outlook assumes continued procedure volume recovery through March and April. Medtronic expects to be back to pre-COVID levels in most of its markets before the end of the fiscal fourth quarter.

On the flip side, Medtronic’s third-quarter fiscal 2022 revenues missed the Zacks Consensus Estimate. The sluggish top-line results reflected the unfavorable market impact of COVID-19 and health system staffing shortages on medical device procedure volumes, primarily in the United States. Specifically, procedure volumes were lighter than expected in markets where the company’s products are used in the more deferrable procedures. For example, the company’s spine business was soft and procedures that require ICU bed capacity like TAVR were down in fiscal Q2.

Considering the greater-than-expected market impact of the pandemic and healthcare system staffing challenges in the fiscal second quarter, also expected to continue into the second half of fiscal 2022, Medtronic now expects fiscal 2022 organic revenue growth of 7-8%, down from the prior expectation of approximately 9%.

Medtronic noted that while it expects the impact of the COVID resurgence to diminish, the effect of the ongoing pandemic on businesses in several markets remains challenging to predict. In the third quarter of fiscal 2022, the company’s U.S. revenues were flat. Non-U.S. developed markets grew a mere 1%, given the impacts of Omicron.

Key Picks

Some better-ranked stocks in the broader medical space that have announced quarterly results are Molina Healthcare, Inc. MOH, Medpace Holdings, Inc. MEDP and Alkermes plc ALKS.

Molina Healthcare, having a Zacks Rank #2 (Buy), reported first-quarter 2022 adjusted EPS of $4.90, which beat the Zacks Consensus Estimate by 3.4%. Revenues of $7.8 billion outpaced the consensus mark by 3.1%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Molina Healthcare has an estimated long-term growth rate of 16.4%. MOH’s earnings surpassed estimates in the trailing three quarters and missed in one, the average surprise being 1.5%.

Medpace reported first-quarter 2022 adjusted EPS of $1.69, which surpassed the Zacks Consensus Estimate by 34.1%. Revenues of $330.9 million outpaced the Zacks Consensus Estimate by 1.1%. It currently has a Zacks Rank #2.

Medpace has a historical growth rate of 27.3%. MEDP’s earnings surpassed estimates in the trailing four quarters, the average surprise being 17.1%.

Alkermes reported first-quarter 2022 adjusted EPS of 12 cents, which surpassed the Zacks Consensus Estimate of a penny. Revenues of $278.6 million outpaced the Zacks Consensus Estimate by 6.2%. It currently sports a Zacks Rank #2.

Alkermes has an estimated long-term growth rate of 25.1%. ALKS’ earnings surpassed estimates in the trailing four quarters, the average surprise being 350.5%.

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