Last week, you might have seen that Medtronic plc (NYSE:MDT) released its second-quarter result to the market. The early response was not positive, with shares down 2.7{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} to US$114 in the past week. It was a credible result overall, with revenues of US$7.8b and statutory earnings per share of US$0.97 both in line with analyst estimates, showing that Medtronic is executing in line with expectations. This is an important time for investors, as they can track a company’s performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. Readers will be glad to know we’ve aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Medtronic after the latest results.
Taking into account the latest results, Medtronic’s 25 analysts currently expect revenues in 2022 to be US$32.4b, approximately in line with the last 12 months. Per-share earnings are expected to grow 12{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} to US$3.90. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$33.0b and earnings per share (EPS) of US$3.96 in 2022. So it’s pretty clear that, although the analysts have updated their estimates, there’s been no major change in expectations for the business following the latest results.
There were no changes to revenue or earnings estimates or the price target of US$141, suggesting that the company has met expectations in its recent result. The consensus price target is just an average of individual analyst targets, so – it could be handy to see how wide the range of underlying estimates is. There are some variant perceptions on Medtronic, with the most bullish analyst valuing it at US$155 and the most bearish at US$127 per share. The narrow spread of estimates could suggest that the business’ future is relatively easy to value, or thatthe analysts have a strong view on its prospects.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. It’s clear from the latest estimates that Medtronic’s rate of growth is expected to accelerate meaningfully, with the forecast 3.8{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} annualised revenue growth to the end of 2022 noticeably faster than its historical growth of 0.3{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to see revenue growth of 8.9{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} annually. So it’s clear that despite the acceleration in growth, Medtronic is expected to grow meaningfully slower than the industry average.
The Bottom Line
The most important thing to take away is that there’s been no major change in sentiment, with the analysts reconfirming that the business is performing in line with their previous earnings per share estimates. On the plus side, there were no major changes to revenue estimates; although forecasts imply revenues will perform worse than the wider industry. The consensus price target held steady at US$141, with the latest estimates not enough to have an impact on their price targets.
With that in mind, we wouldn’t be too quick to come to a conclusion on Medtronic. Long-term earnings power is much more important than next year’s profits. We have forecasts for Medtronic going out to 2024, and you can see them free on our platform here.
It is also worth noting that we have found 1 warning sign for Medtronic that you need to take into consideration.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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