Will Solid Diabetes Arm Drive Medtronic's (MDT) Q1 Earnings?
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Will Solid Diabetes Arm Drive Medtronic's (MDT) Q1 Earnings?
Medtronic (MDT) poised to gain on strength in Diabetes business in Q1 on continued uptake of MiniMed 670G system in the United States along with enhanced sensor supply capacity.
Medtronic plc’s MDT Diabetes Group has been on a solid growth trajectory of late, courtesy of encouraging contributions from majority of the sub-segments.
We expect this strength to reflect in first-quarter fiscal 2019 results, which are scheduled to release before the opening bell on Aug 21.
Click here to know how the company’s overall Q1 performance is expected to be.
Diabetesin Focus
The Diabetes Group comprises the Intensive Insulin Management (IIM), Non-Intensive Diabetes Therapies (NDT), and Diabetes Services & Solutions (DSS) divisions. The Diabetes business develops, manufactures, and markets advanced, integrated diabetes management solutions that include insulin pump therapy, continuous glucose monitoring (CGM) systems, and therapy management software.
We note that management expects low double-digit revenue growth in the Diabetes Group in fiscal 2019, with a stronger performance in the first half of fiscal 2019. Per management, strong adoption of the MiniMed 670G system in the United States along with the recent U.S. launch of Guardian Connect systems and enhanced sensor supply capacity will drive the upside.
Further, on enhanced sensor supply capacity, Medtronic seems to be upbeat about expanding its commercial efforts for the Guardian Connect systems in Europe.
Medtronic PLC Price and EPS Surprise
Medtronic PLC Price and EPS Surprise | Medtronic PLC Quote
Consequently, the Zacks Consensus Estimate for Diabetes Group revenues of $529 million indicates a rise of 17.8% from the year-ago quarter.
In the last reported quarter, the segment recorded improvement in sales and benefited from increased uptake of the new sensor-augmented insulin pump systems in the United States as well as international markets along with enhanced production capacity for the same. Notably, the MiniMed 670G system has served more than 70,000 patients. We expect the trend to continue in the yet-to-be-reported quarter as well.
During the fourth quarter of fiscal 2018, Medtronic proceeded with initiatives to boost the performance of its MiniMed portfolio. In February, the company expanded its product portfolio with the addition of MiniMed Mio Advance infusion set. The latest offering in the Diabetes business was made commercially available in Canada, Hong Kong and certain countries in Europe in fourth-quarter fiscal 2018.
In the same month, the company announced that the FDA has approved a new arm indication for the Guardian Sensor 3 continuous glucose monitor (CGM) used with the MiniMed 670G insulin pump. Notably, the Guardian Sensor 3 is the company’s latest and most accurate CGM. Per Medtronic, this is the only sensor to have received an FDA nod for controlling automated insulin delivery via a hybrid closed loop system, the MiniMed 670G.
This new arm indication for the Guardian Sensor 3 offers more convenience and flexibility to patients. It is available in the United States for use with the MiniMed 670G system. We believe these developments will be beneficial to the company’s Diabetes Group portfolio, which should get reflected in the yet-to-be-reported quarter’s results.
A glimpse of the sub-segments before the earnings release —
IIM revenues rose in the high-20s at CER in the fourth quarter of fiscal 2018. This growth was led by solid uptake of MiniMed 670G system in the United States along with the Guardian sensor 3 CGM.
In addition, the division delivered mid-20s digit constant currency growth in international markets on account of continued strength in the MiniMed 640G system. Globally, Medtronic continued to see strength in Europe. Further, the company is upbeat about the receipt of regulatory approval for the 640G system in Japan.
Given the developments with regard to the MiniMed 670G system, we expect top-line contributions from the continued uptake of this product to rise and get reflected in first-quarter results.
DSS grew low-double digits at CER as consumables benefitted from rise in installed base and enhanced patient utilization. The improvement in this business is expected to continue.
Largely due to increased commercial focus on the launch of MiniMed 670G and rising rivalry, Medtronic’s NDT business has been seeing declining revenues.
Zacks Rank & Stocks to Consider
Medtronic currently carries a Zacks Rank #4 (Sell).
A few better-ranked stocks in the broader medical space are Amedisys, Inc. AMED, Intuitive Surgical ISRG and Inogen, Inc. INGN.
Amedisys’ expected long-term earnings growth rate is 18.9%. The stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Intuitive Surgical’s long-term expected earnings growth rate is 14.7%. The stock carries a Zacks Rank #2 (Buy).
Inogen’s long-term expected earnings growth rate is 24.5%. The stock has a Zacks Rank #2.
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