Following recent virtual investor meetings with Medtronic executives, analysts have identified a handful of important things investors should know.
Truist analysts cited the medtech giant’s recent steps to change the company’s direction as it develops its pipeline, which includes the much-anticipated Hugo robotic surgery system. The analysts stand firm on their opinion that investors should be buying MDT shares, but they had three key points regarding why:
1. Market share growth
According to the analysis, since CEO Geoff Martha took over for Omar Ishrak close to one year ago, Medtronic’s focus has been centered on market share growth.
Martha told the analysts that the company’s newly implemented operating model is designed to reduce the layers of decision-making, separating into 20 “empowered operating units,” or segments given control they didn’t have before.
He suggested that employee morale is high and internal surveys have returned positive results since implementation started on the new operating model.
2. New offerings
Hugo is atop the list of anticipated products from Medtronic down the line as the company makes its robotic surgery play. The analysts say it is “increasingly close to launch.” At the same time, Medtronic management has indicated that a key advantage in the soft tissue robotics market will be its global footprint and leveraging legacy Covidien relationships.
Medtronic is also planning to target high-volume robotics excellence centers, too, according to the analysis. The company is said to be on track to file for FDA investigational device exemption approval and CE mark within “the next couple of weeks.”
Management at the company anticipates Hugo’s launch outside the U.S. and Europe, too, with some initial revenue contribution expected to come into play during Medtronic’s fiscal fourth quarter for 2021.
“We feel really great about our platform, the feedback we’ve got, the open console, the modularity upgrade, ability to leverage of our surgical instrumentation,” Medtronic Medical Surgical EVP and President Bob White said during the company’s latest earnings call.
3. Street underappreciation
The analysts said Martha found three factors as to why investors may underappreciate Medtronic: the potential of its neuroscience portfolio, the company’s ultimate goal to compete in the pharmaceutical space and heavy investments in support of surgical robotics and renal denervation.
The potential for these areas of the company to grow may be making investors hesitant, but it has the company bullish over what’s to come down the line.
Medtronic aims for 8% growth in its earnings per share, even with the costs of investment into surgical robotics and renal denervation, as R&D investment is at a healthy level across the company in other areas of business.