Medtronic’s Q1 EPS beat estimates, confirms FY17 EPS view

Medical technology and services company Medtronic Plc (NYSE: MDT) reported a 1% y-o- y decline in the fiscal 2017 first-quarter revenue.

However, the revenue was in line with the analysts’ estimates.

The Q1 earnings also topped the Street views. Considering the optimistic view of the management about the upcoming quarters and the reaffirmation of fiscal 2017 earnings and revenue growth on a Constant Currency and Constant Week (CCCW) basis, we believe that the share price is poised for further rise.

Medtronic ended the prior trading day at $87.46.

The Dublin, Ireland-based company reported a 1% decline in the first-quarter sales to $7.167 billion, from $7.274 billion in the similar period last year. The first-quarter revenue met the Zacks estimates. Currency exchange rate fluctuations negatively impacted the top line by $7 million.

Medtronic Diabetes Europe, Middle East, Africa

The Cardiac & Vascular group recorded 2% y-o- y decline in the revenue to $2.52 billion. The Minimally Invasive Therapies group reported 1% y-o- y decline in the revenue to $2.42 billion. The Restorative Therapies group posted revenue of $1.77 billion, down from $1.80 billion last year. The Diabetes group’s revenue was $452 million, up 2% compared to last year.

During the first-quarter of 2017, the net income increased to $929 million or $0.66 per share, from $820 million or $0.57 per share in the first-quarter of 2016. Lower costs and tax payments ensured that the net income was higher on a y-o- y basis.

Excluding charges, the first-quarter non-GAAP net income was $1.03 per share, up from $1.02 per share in the corresponding quarter last year. The recorded Q1 2017 non-GAAP earnings were greater than the Wall Street estimates of $1.01 per share. On an adjusted constant currency basis, the non-GAAP EPS for the first-quarter stood at $1.07 per share.

For the full year 2017, Medtronic reiterated revenue growth in the range of 5% to 6% on a CCCW basis, compared to the prior year. The company also reaffirmed the fiscal 2017 non-GAAP EPS to grow between 12% and 16% on a CCCW basis. This reflects a non-GAAP EPS in the range of $4.60 to $4.70 per share.

During the first-quarter, the operating income increased to $1.56 billion, from $816 million in the Q1 2016. Medtronic also completed the acquisition of HeartWare International for $1.1 billion. The company anticipates the revenue to grow in the upcoming quarters based on the overall recovery in the business climate and the successful acquisition. Thus, considering the optimistic view of the management of Medtronic, we believe that the share price would recover in the imminent future.

The stock chart of Medtronic reveals support at 80. The next higher resistance is at 87. The stochastic reading of about 30 indicates an oversold scenario. Thus, we believe that the stock would able to break above the barrier of 87 in the weeks to come.

Considering this, we advise trading a one touch call option contract. The binary trader should also pick a target level of not greater than $87 for the suggested call option trade. The expiry period of the call option should be in the last week of September.

Chad Simmons

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