Medtronic (MDT.US) Q2 Earnings Preview: Multiple Headwinds Weigh on Performance

SmartCom APP learned that Medtronic (MDT.US) will announce its fiscal 2023 second-quarter earnings before the U.S. stock market opens on November 22. Zacks expects the company's Q2 revenue to be $7.72 billion, a year-over-year decrease of 1.7%, and earnings per share to be $1.28, a year-over-year decrease of 3.03%.

In the past few quarters, Medtronic's core business has been under pressure due to global macroeconomic turbulence and a severe shortage of healthcare professionals. The company stated in August that inflation and rising freight costs would impact its second-quarter performance. Pandemic-related restrictions are expected to affect the company’s key business lines in markets such as Japan.

Moreover, the company is concerned that inflation and exchange rate factors could impact profit margins. Given that inflation in raw materials and freight costs has become increasingly severe over the past quarter, Medtronic stated in its Q1 earnings call in August that it would prioritize R&D investment for future growth. This may put additional pressure on profit margins in the second fiscal quarter.

Overall, Medtronic expects organic growth in second-quarter revenue to be between 3% and 3.5%, with currency losses ranging from $365 million to $415 million, and earnings per share projected to be between $1.26 and $1.30.

By business division, the company's cardiovascular portfolio is expected to see revenue growth of 5% to 5.5% in the second quarter. Medtronic launched its Evolut FX TAVR system in the United States, receiving strong customer feedback. In rhythm management, the AURORA extravascular ICD is anticipated to achieve robust sales.

In the neuroscience portfolio, Medtronic is expected to increase its market share in the cranial and spinal technology sectors. Demand for the company's new spinal implants will drive growth. Strong sales of the Mazor Robotic System and StealthStation Navigation System are anticipated in the second quarter. The company previously projected that revenue from the neuroscience portfolio would grow by 5.5% to 6% in the second quarter.

In the medical surgical and surgical robotics fields, Medtronic remains focused on promoting the Hugo surgical robot while expanding production capacity. Medtronic recently completed installations of Hugo in multiple regions, including Denmark, France, and Italy, which could drive revenue growth in the second quarter. However, Medtronic stated that due to increased bulk procurement in many provinces across China, medical surgical portfolio revenue in the second quarter is expected to decline by 0.25 percentage points to an increase of 0.25 percentage points.

In the diabetes sector, increased competition is expected to pressure Medtronic's sales in the U.S. during the second quarter, potentially impacting growth significantly. However, with the growing user base of the MiniMed 780G insulin pump and Guardian 4 sensor, the company is well-positioned for notable growth in markets outside the U.S. Medtronic anticipates a 3% to 6% organic decline in diabetes portfolio revenue for the second fiscal quarter.