That seemed to be the big message in a report out today from Needham & Co. analysts. They previewed what they expect from Medtronic’s Q1 results release on Aug. 23.
“Current guidance requires a steep ramp in revenue and EPS growth through FY23. While comps do get progressively easier, we lack confidence in Medtronic’s ability to execute in a challenging macro environment with multiple factors outside its control,” said Mike Matson, David Saxon and Joseph Conway at Needham & Co.
Medtronic is facing challenges
Geoff Martha has had ambitious goals since he took over Medtronic’s corner office in 2020. That included engaging in a major reorganization to make the $32-billion-a-year company more nimble and competitive. Medtronic, however, has suffered a series of setbacks over the past year. There were delays in the company’s pivotal ON MED study of its renal denervation system, supply chain challenges around the rollout of its Hugo surgical robotics system, and regulatory troubles for its Diabetes business.
After Medtronic announced a Q4 earnings miss in May, Needham & Co. downgraded its rating of MDT shares to Hold. Other analysts at the time stayed put with their ratings of the stock — even as they offered their own critiques.
On a more positive note, the Needham & Co. analysts expect Medtronic to beat The Street in Q1, saying that the macroeconomic factors in the company’s previous guidance were less severe than expected.
Martha has hinted at potential M&A or spinoff deals to boost Medtronic. The Needham & Co. analysts said: “We believe that the Diabetes and Spine businesses could be considered for either sales and/or spin-offs however, we don’t expect any potential transaction to result in immediate value creation for shareholders.”
Medical device companies, in general, are seeking to navigate their way through a host of macroeconomic challenges. Medtech faces a strong U.S. dollar (a hurdle for American companies selling overseas), supply chain disruption and inflation. There have been a wide variety of responses. Companies such as Ambu and Butterfly Network have already announced layoffs. On the other side of the spectrum, there are companies such as Zimmer Biomet that say they’re going to innovate their way through.