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HomeMarketMedtronic Lowers Earnings Guidance. The Stock Is Falling.

Medtronic Lowers Earnings Guidance. The Stock Is Falling.

Medtronic now expects fiscal 2023 earnings n the range of $5.25 a share to $5.30 a share.

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Courtesy of Medtronic

Medtronic
stock was falling Tuesday after the medical device maker’s fiscal second-quarter sales fell short of expectations and management lowered its forecast of earnings for the year.

Medtronic
(ticker: MDT) reported adjusted earnings of $1.30 a share on revenue of $7.59 billion in its fiscal second quarter, compared with adjusted earnings of $1.32 a share from revenue of $7.85 billion last year. Analysts surveyed by FactSet were expecting adjusted earnings of $1.28 a share on revenue of $7.7 billion.

“Slower than predicted procedure and supply recovery drove revenue below our expectations this quarter,” Chief Executive Geoff Martha said in the earnings release. The company said its fall in earnings decline reflects the continued effect of inflation on the cost of materials, labor, freight, and utilities.

For the second half of fiscal 2023, Medtronic said it expects revenue growth of 3.5% to 4.%. If foreign currency exchange rates as of the beginning of November hold, revenue growth in fiscal 2023 would be negatively affected by about $1.74 billion to $1.84 billion, vs. the previously expected $1.4 billion to $1.5 billion impact.

The company also said it now expects fiscal 2023 earnings to be in the range of $5.25 a share to $5.30 a share, including an estimated 18-cent negative impact from foreign currency. The company previously expected earnings in the range of $5.53 a share to $5.65 a share.

“Given a slower pace of market and supply recovery, we’re reducing our revenue expectations for the remainder of the year,” Chief Financial Officer Karen Parkhill said in the earnings release. “On the bottom line, we are driving expense reductions throughout the company to help offset the lower revenue and the effects of cost inflation.”

Cowen analyst Joshua Jennings wrote in a research note Tuesday that “as anticipated, macro factors — including continued supply chain challenges as well as pressure from inflation and foreign exchange — weighed upon the company’s fiscal second-quarter top-line performance.”

Jennings rates the stock as Outperform with a $117 price target. Of the 29 analysts surveyed by FactSet,14 have the stock at Buy, 14 rate it a Hold with one analyst rating Medtronic at Sell.

Shares of Medtronic were down 6.6%, putting them on pace for their largest percentage decrease since June 2020, according to Dow Jones Market Data. The current stock price of $76.86 would be the lowest close since March 2020. The stock has now fallen 26% this year, and is on pace for its worst year since 2008.

Medtronic was a Barron’s stock pick earlier this year.

Write to Angela Palumbo at angela.palumbo@dowjones.com

Credit: marketwatch.com

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