For Immediate Release
Chicago, IL – February 21, 2012 – Zacks.com announces the list
of stocks featured in the Analyst Blog. Every day the Zacks Equity
Research analysts discuss the latest news and events impacting
stocks and the financial markets. Stocks recently featured in the
blog include Medtronic (MDT),
Boston Scientific (BSX), St Jude
Medical (STJ), Edwards Lifesciences (EW)
and The Goldman Sachs Group Inc. (GS).
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Here are highlights from Friday’s Analyst
Blog:
Earnings Preview: Medtronic
Leading medical devices company Medtronic (MDT)
is scheduled to report its third quarter of fiscal 2012 results
before the market opens on Tuesday, February 21, 2012. The company
is expected to earn an EPS of 84 cents on revenues of $4.029
billion during the quarter, according to the Zacks Consensus
Estimate.
Medtronic exceeded its expectations in two of the last four
quarters. The four-quarter positive surprise of 0.94% implies that
the company has surpassed the Zacks Consensus Estimate by this
magnitude over the last four quarters.
Previous Quarter Highlights
Medtronic reported an adjusted EPS of 84 cents in the second
quarter of fiscal 2012, a couple of cents ahead of the Zacks
Consensus Estimate and the year-ago quarter. Revenues were $4.132
billion in the quarter, up 6% year over year (up 3% at constant
exchange rates or CER) and higher than the Zacks Consensus Estimate
of $4.066 billion.
Medtronic’s seven divisions – CRDM, Spinal, CardioVascular,
Neuromodulation, Diabetes, Surgical Technologies and Physio-Control
– generated corresponding sales of $1.268 billion (up 2% year over
year but down 2% at CER), $839 million (down 1% or down 3% at CER),
$830 million (up 12% or 8% at CER), $421 million (up 9% or 6% at
CER), $367 million (up 13% or 10% at CER), $298 million (up 22% or
20% at CER) and $109 million (flat or down 3% at CER). The company
has decided to sell its Physio-Control business to Bain Capital for
$487 million in cash.
Agreement of Estimate Revisions
Estimate revision trends among the analysts for the third
quarter and the fiscal have been on the downside. Over the last 30
days, out of 21 analysts covering the stock, 3 lowered their
estimates for the quarter while only 1 moved in the opposite
direction. A similar situation applies for the fiscal with 2
downward revisions over the past month and none raising their
estimates.
The decline in estimates reflects the issues troubling the
company’s core businesses and the current economic uncertainties.
The biggest segment at Medtronic, CRDMhas been affected by
physician reaction to a study result published by the Journal of
the American Medical Association regarding evidence-based
guidelines for ICD implants and US Department of Justice’s
investigation into hospitals' ICD implants.
This situation is taking its toll across the industry as
reflected in the recently reported results of Medtronic’s peers,
Boston Scientific (BSX) and St Jude
Medical (STJ). Moreover, the Spinal segment is also
witnessing several headwinds such as pricing pressure and decline
in procedure volume.
We also expect an update regarding the US trial of Medtronic’s
CoreValve system. This is significant since Edwards
Lifesciences (EW) has already received approval from the
US Food and Drug Administration for its Sapien transcatheter heart
valve (“THV”). Over and above, Medtronic’s prominent presence in
the European market, which is shrouded in macroeconomic challenges,
might affect the company’s sales growth.
Although recent product launches in the CRDM business will
provide some incremental sales, Medtronic’s top line would continue
to remain under pressure. This might force the company to revise
its guidance for fiscal 2012. The current Zacks Consensus Estimate
for the fiscal stands at an EPS of $3.45 on revenues of $16.534
billion. However, the continuous share buyback program and
restructuring initiatives undertaken by the company might be a
cushion to the bottom line.
Magnitude of Estimate Revisions
Given nominal estimate revisions from the analyst community,
though tinged with doubt, over the past 30-day period, the
consensus estimate for the current quarter dropped by a penny to 84
cents. However, the consensus estimate for fiscal 2012 remained
static at $3.45 over the past month.
Recommendation
Having witnessed several headwinds in its two biggest segments –
CRDM and Spinal – Medtronic is trying every means to revive growth.
This includes penetration of international markets, portfolio
expansion and restructuring initiatives, which should benefit the
company over the long term. Moreover, acquisitions done over the
past few years are contributing to total revenues, a positive trend
that is expected to continue. Meanwhile, Medtronic has increased
its focus on the emerging markets that have been garnering
significant growth.
Despite the measures, economic uncertainty is impacting
procedure volume. Longer term, we have a Neutral recommendation on
Medtronic. The stock retains a Zacks #3 Rank (“Hold”) in the short
term.
Goldman Sachs Upgraded to Neutral
We have upgraded our recommendation on The Goldman Sachs
Group Inc. (GS) to Neutral from Underperform.
The upgraded recommendation is based on the company’s recent
expansions to generate revenue growth, coupled with targeted cost
reduction initiatives.
Goldman is on a buying spree. The company has agreed to purchase
a 4.8% stake in Mongolia’s Trade and Development Bank. The terms of
the deal were not disclosed. Goldman’s stake purchase in the
Mongolian bank indicates its plan to gain exposure in the Mongolian
economy, whose growth is stimulated by the developing resources of
the country.
Furthermore, the company announced its plan to purchase
Vermont-based Dwight Asset Management Company. The deal, whose
terms are still undisclosed, is expected to close in the second
quarter of 2012. The completion of the acquisition would help
Goldman to gain significant market share in the defined
contribution investment-only business. Moreover, the bank would be
able to prosper in defined contribution business and provide more
investment plans to facilitate retired people in capitalizing on
their retirement savings.
In the current difficult economic and financial conditions,
Goldman has taken an internal initiative to identify areas where it
can operate more efficiently. The company has targeted about $1.4
billion in run rate compensation and non-compensation reductions
and expects to complete them as soon as possible.
Moreover, Goldman is constantly balancing the near-term
uncertainties with long-term strategic goals. It plans to hold more
capital to protect itself from the current macro uncertainties and
be able to stick to the commitment of providing strong relative
return to shareholders. The company proposes to invest in
attractive regions and businesses to enhance growth and reduce the
number of businesses experiencing lower client demand.
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BOSTON SCIENTIF (BSX): Free Stock Analysis Report
EDWARDS LIFESCI (EW): Free Stock Analysis Report
GOLDMAN SACHS (GS): Free Stock Analysis Report
MEDTRONIC (MDT): Free Stock Analysis Report
ST JUDE MEDICAL (STJ): Free Stock Analysis Report
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