Q3 2024 Earnings Summary
- Medtronic's Diabetes business is returning to growth in the U.S., with significant increases in both new patient acquisitions and renewals, driven by the MiniMed 780G system. The company expects continued progress in rebuilding its installed base, supported by high growth in insulin pump sales.
- The company is seeing strong progress with the Hugo robotic system outside the United States, expanding installations globally and receiving positive feedback on its features, including the open console and digital ecosystem. This progress, along with ongoing U.S. trials, positions Hugo as a meaningful growth driver in the years ahead.
- Medtronic is confident in its ability to achieve durable mid-single-digit revenue growth, driven by recent and upcoming product launches such as the Aurora EV ICD and PulseSelect PFA catheter, which are expected to accelerate growth in its Cardiac Ablation Solutions business. Clinician feedback has been exceptional, indicating strong potential for market acceptance and growth. ,
- 1. Medtronic's earnings growth has been flat compared to peers, with lingering headwinds from inflation, currency fluctuations, and global tax reforms potentially impacting future earnings growth.*
- 2. Increased competition in key areas such as the atrial fibrillation (Afib) business has led to a low double-digit decline in U.S. revenue, as the company lost market share due to a new competitor in the cryoablation segment.*
- 3. Significant investments in new technologies, like the Hugo surgical robot, continue to be a meaningful drag on earnings, requiring substantial investment before becoming profitable, creating uncertainty over the timeline for profitability.*
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FY '25 Earnings Outlook
Q: Are you comfortable with FY '25 consensus EPS growth?
A: Karen Parkhill noted there are no major changes to the FY '25 outlook discussed previously. They expect to continue mid-single-digit growth and will provide guidance in May. While facing headwinds from inflation, tax, and FX, they are focused on delivering on commitments. -
Patient Monitoring Retention
Q: Why are you keeping Patient Monitoring and exiting ventilators?
A: Geoffrey Martha explained that improved competitive positioning in the monitoring business and declining profitability in ventilators led them to retain monitoring while winding down ventilators. This allows increased investment in monitoring without diluting the P&L. -
Gross Margin Improvement
Q: Can you discuss gross margin productivity initiatives?
A: They are improving gross margins through better pricing and cost savings. Pricing has increased by about 200 basis points due to innovation, and they are implementing cost-of-goods-sold productivity programs across operations. -
Commitment to Earnings Growth
Q: Can you commit to trend earnings growth over medium term?
A: Karen Parkhill affirmed commitment to delivering the right earnings growth over the medium and long term, focusing on overcoming headwinds and improving the company's earnings power. -
Product Launches and Outlook
Q: What's the outlook for key products like Hugo, Aurora, PulseSelect, and Diabetes?
A: They are seeing good progress with Hugo globally, expanding installations and positive feedback. For PulseSelect and Aurora, they expect growth now, with full impact into next year. In Diabetes, they see significant growth in new patients and renewals with the 780G launch in the U.S. -
Afib Business Outlook
Q: What's your outlook for the Afib business amid U.S. declines?
A: They expect a return to growth, driven by new products like PulseSelect and their point-by-point ablation technology. Full impact is anticipated into next year, with strong performance outside the U.S. giving confidence. -
Structural Heart SMART Study
Q: How will the SMART study results impact the market?
A: The SMART study is on schedule, with data to be presented at ACC. They are excited about its potential impact, particularly in patients with small annuli, which comprise about 40% of the global market, and see it as a catalyst for growth.
Research analysts covering Medtronic.