Medtronic (NYSE: MDT) is set to report its Q4 fiscal 2023 results on May 25. While the company’s new products and better pricing environment should continue to benefit its revenue and earnings, we expect its Q4 results to be largely in line with street estimates. However, we believe that the stock has little room for growth.
What To Expect From Q4 Fiscal 2023 Results?
1. Better Pricing To Aid Sales
- The consensus estimate for Medtronic’s Q4 FY23 total revenues is $8.3 billion. However, our estimate is slightly lower at around $8.2 billion, reflecting a low single-digit YoY rise.
- The company is expected to benefit from its new products, including its Micra AV pacemaker and Onyx Frontier drug-eluting stent, and continued strength in cardiac products.
- However, sales in the Medical Surgical segment may see a decline due to lower ventilator demand. Additionally, forex headwinds may also weigh on overall top-line growth. Medtronic expects around 4.5% to 5% organic revenue growth in Q4.
2. EPS expected to align with consensus estimates
- Medtronic’s Q4 FY23 earnings per share (EPS) are expected to be around $1.56, in line with the consensus estimate.
- The company’s net income of $1.7 billion in Q3 reflected a 6% drop YoY, with the adjusted operating margins falling over 200 bps to 25.9%.
- In FY23, we expect the company’s EPS to be lower at $5.29 compared to the $5.55 seen in FY22.
3 MDT Stock has Little Room for Growth
- Our estimate for Medtronic’s valuation is $97 per share, reflecting only an 8% upside from its current market price of around $90.
- If the company reports upbeat Q4 results and guidance for FY24 is better than the street estimates, there could be a revision in its P/E multiple upward resulting in higher levels for MDT stock.
While Medtronic’s stock may experience higher levels, we believe that this may not be attractive in light of the pricing discontinuities created by the Covid-19 crisis. However, this may also present attractive trading opportunities.
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| Returns | May 2023 MTD [1] | 2023 YTD [1] | 2017-23 Total [2] |
| MDT Return | -4% | 12% | 22% |
| S&P 500 Return | -1% | 8% | 85% |
| Trefis Multi-Strategy Portfolio | 0% | 9% | 243% |
[1] Month-to-date and year-to-date as of 5/24/2023
[2] Cumulative total returns since the end of 2016
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
