Leerink Partners Raises Price Target on Medtronic (MDT) Following 4Q Report
Leerink Partners reiterated a Market Perform rating on Medtronic, Inc. (NYSE: MDT), and raised the price target to $85.00 (from $82.00), following the company's 4Q earnings report. MDT delivered its 6th consecutive quarter of mid- to high-single-digit sales growth, building a consistent track record.
Analyst Danielle Antalffy commented, "MDT shares traded lower yesterday driven by what we believe were expectations of more positive operating leverage than the company delivered, potentially as well as a more conservative 2017 outlook that came in modestly below consensus at the midpoint of the range seemingly due to less margin expansion than expected. Still, MDT has now delivered 6 consecutive quarters of mid- to high-single-digit sales growth (ex. FX), building a consistent track record driven by solid execution of the company’s three “growth vectors”, particularly new products where the company continues to exceed its own internal expectations. But operating leverage is another key piece of the MDT story, with operating margins coming in at 30.3% as reported, just below management's expectations of over 31% and also below our 31.3% estimate. And we are increasingly cautious on the company’s ability to manage through what we believe could be meaningful top-line headwinds in F2H17 and FY2018 in order to sustain this solid mid-singledigit growth trajectory, including: (1) A competitive CRM (cardiac rhythm management) product cycle, (2) Current and upcoming competitive launches in DES (drug eluting stents), (3) Potential modest share loss in U.S. TAVR (transcatheter aortic valve replacement) with a competitor likely receiving an expanded indication ~12-18 months ahead of MDT; (4) Continued share losses in Spine and Neuromodulation, particularly in SCS (spinal cord stimulation), DBS (deep brain stimulation), and implantable drug infusion pumps. With these top-line headwinds over the medium term, sources of incremental positive leverage are even less clear."
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Shares of Medtronic, Inc. closed at $80.48 yesterday.