Medtronic is facing sluggish sales growth, is in the midst of deep cost-cutting and started ongoing global layoffs in April. It's also spinning off businesses with weaker profit margins.
So med-tech analysts will be watching closely Thursday as the world's largest medical device maker reports its fiscal fourth-quarter results.
Wall Street analysts have predicted a consensus revenue estimate of $8.25 billion for the quarter, a 2% increase over the year-ago period. They predict adjusted earnings per share of $1.56, a 2.6% increase, for Medtronic, which is based in Ireland but run from Fridley, Minnesota.
"We believe that (Medtronic) appears to be turning a corner," said Mike Matson of Boston-based Needham & Co. in a research note. He called the company's recent challenges such as supply-chain issues "transitory."
Yet making changes to a company with the size, diversity and complexity of Medtronic is no easy task, said Rick Wise, managing director for the health care sector at St. Louis-based Stifel.
In the long term, Wise said he's optimistic about Medtronic CEO Geoff Martha's leadership.
"You try to move this supertanker; it's challenging," he said. "I think he's taking the company in a positive direction. It's going to take time. Do I wish it could go faster? I sure do."
So it's important, he said, that Medtronic leaders give achievable financial targets to Wall Street.
"They've got to guide and comment about future expectations in a way that they don't disappoint," he said.
While providing some guidance, the company has resisted providing specifics in other areas such as job cuts.
"The company is still working through employee notifications over the coming months," Erika Winkels, a Medtronic spokeswoman, said on Monday.
The company also chose not to make an official U.S. announcement on the expansion of the Medtronic Engineering and Innovation Center (MEIC) in Hyderabad, India, its largest research and development center outside the U.S.
Medtronic said in a news release distributed in India that the "investment is a part of Medtronic's overall global R&D led innovation and growth strategy." MEIC employs more than 800 people, primarily engineers. Over the next five years, employment is expected to grow to more than 1,500 staffers.
When Medtronic reported in February that its third fiscal quarter sales were down 0.5%, Robbie Marcus, an analyst with J.P. Morgan, said the company was the "most inconsistent" among its med-tech competitors.
Yet Marcus wrote in a forecast last week that he thinks that Medtronic can beat both sales and profit expectations for the fourth quarter, buoyed by industry trends.
"We've seen solid results across the board in med-tech thus far, with procedure volumes across cardiovascular, spine, and surgery largely at or above pre-pandemic levels," Marcus wrote.
Yet some issues continue to plague Medtronic.
The U.S. Food and Drug Administration issued a warning letter to Medtronic's diabetes business in December 2021 over how the company handled some insulin pump complaints and recalls. The regulatory cloud hung over the diabetes business for 16 months before it was lifted in April.
The FDA also approved Medtronic's MiniMed 780G, its newest insulin pump. The status of the approval was in limbo while the warning letter was in effect.
Minneapolis-based Piper Sandler & Co. analysts saw the FDA approval as good news, but said that many challenges remain for the diabetes business: "While a welcome surprise for (Medtronic's) diabetes franchise, we remain skeptical that this is the final piece of the puzzle. In some of our recent conversations with diabetes educators, they indicate that there is a loss of trust with (Medtronic) that will take 'multiple years' to remedy."
Piper Sandler analysts pointed out that the diabetes business accounts for only 3% of the company's revenue and that the MiniMed 780G approval would offer just a "modest boost" to overall sales.
