Medtronic's Spine Division Continues To Lag The Market

Medtronic PLC (NYSE: MDT) provided further details regarding its revenue and EPS growth plan, which BTIG’s Sean Lavin views as achievable.

Lavin maintains a Neutral rating on the company.

Medtronic’s Goals

“While we hope MDT hits these goals; with continued pricing pressure and a growing mix of lower margin business, we see OM goals as higher risk than revenue and EPS plans,” the analyst mentioned.

While viewing robotics, transcatheter valves, diabetes, MIS surgery and S-ICD with pacing favorably, Lavin expects CRM to face competitive pressures and no solution for the spine segment apart from M&A.

Related Link: Medtronic Q4 Results Top Expectations, Provide Soft Guidance For Fiscal Year 2017

“MDT suggested material progress, noting it’s on its 10th prototype and has been in dialogue with surgeons and the FDA,” Lavin stated.

Goals Reasonable

Management expects significant revenue in F19, although they did not provide any details about pricing and the go-to-market strategy.

EPS and free cash flow growth are likely to be at risk, although the ASP pressure raises doubts regarding margins.

“Mgmt’s goal to deliver double digit EPS and high single-digit FCF growth appear reasonable to us. That said, continued pricing declines and a growing mix of lower margin service business make us cautious around GMs and OM expansion plans,” Lavin said.