Medtronic [MDT: NYSE] is scheduled to report Q3 results on Tuesday, February 19, after the close of markets. The medical equipment maker is expected to earn $0.30 per share on sales of $1.62bn, and we believe it should have little trouble doing so. Medtronic has built a reputation of consistently matching estimates. For the last four quarters, the company has been able to either meet or beat analysts’ expectations. A strong pipeline and near-term catalysts in the form of new product launches allows us to reiterate our Buy rating.
When Q3 results are released, we will be looking for improvement in several key areas of Medtronic’s business:
We are looking for strong sales in Medtronic’s core Cardiac Rhythm Management (CRM) segment. The firm’s implantable cardioverter defibrillators (ICD) and InSync cardiovascular device should drive growth in this division. Last quarter, Medtronic reaped $25m in sales from its InSync product, and we would like to see increased momentum in this area.
Medtronic’s Spinal/Neuro/Diabetes/ENT division should also register strong revenue growth, as Q3 will be first quarter that MiniMed sales will be included (MiniMed is a diabetes product maker acquired in August 2001). We are looking for MiniMed to add about $65m-$70m to total sales, which should allow revenues in this division to come in 30% higher than last year.
We expect an update on Medtronic’s experimental bone graft product, InFuse BMP. InFuse BMP is currently in clinical trials, and is expected to be launched in the second half of this year. Once on the market, the product could be a significant growth driver.
Another product in the pipeline for 2002 is the InSync ICD. The product is scheduled to be reviewed by a Food and Drug Administration (FDA) panel on March 5. The device is in direct competition with Guidant’s [GDT:NYSE] Contak CD product, and the two companies are in a race to win regulatory approval. We estimate that the products, if approved, will be launched sometime in the second half of this year.
Growth, going forward, looks to be steady. Medtronic reiterated, earlier this month, its long-term goal of increasing sales by 15%-17% per year over the next few years. Management expects growth to be fueled by its stable of new products. The drug-coated stent, the next generation of stent products, is key to this view. Medtronic is currently trailing Johnson & Johnson [JNJ: NYSE] and Guidant in clinical trials, but we believe it should be able to roll out its version of the drug-coated stent in the second half of 2003. The product should significantly contribute to growth for that year and beyond.
ideaadvisor.com
15% growth is great. Many techs would love that.
Jack |
