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Why Medtronic's Latest Quarterly Results Weren't as Good as They Might Seem

By Keith Speights and Brian Orelli, PhD – Sep 4, 2021 at 10:55AM

Key Points

  • Medtronic delivered 23% year-over-year revenue growth in its fiscal 2022 first quarter.
  • However, this growth was largely due to a huge dent in revenue in the prior-year period resulting from the COVID-19 pandemic.
  • The company's two-year revenue growth is much lower.

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The healthcare giant posted strong growth. But there's more to the story.

Medtronic (MDT 0.14%) recently reported its fiscal 2022 first-quarter results. In this Motley Fool Live video recorded on Aug. 25, Motley Fool contributors Keith Speights and Brian Orelli discuss why those results really weren't quite as good as they seemed.

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Keith Speights: Brian, most healthcare companies have already reported their second-quarter results or latest quarterly results, but we're still seeing some earnings reports come in here and there. This week, one healthcare giant, Medtronic, MDT is the ticker there, announced its fiscal 2022 Q1 results and Medtronic announced those on Tuesday.

What do you make of those results and were there any things that investors should especially note in Medtronic's Q2 update or Q1 update?

Brian Orelli: You got to be careful here because Medtronic doesn't follow the standard calendar. These are results from the quarter that ended July 30, and that's their first fiscal quarter. Revenue was up 23% as reported and 19% organically, which backs out the changes in currency. Of course, that's comparing to last year when we were in the thick of the pandemic and people were canceling non-urgent surgeries.

If you go back to 2019 and look at the growth over the last two years, Medtronic didn't do this, but I encourage people to do it for all of their companies that were affected by the pandemic last year. If you look over those two years, revenue was only up 6.6%. I didn't annualize that, that's literally the combined between 2019 and 2021.

Obviously, the company isn't growing that quickly. To put the quarter in perspective, the guidance for the entire fiscal year, and remember, this is the first fiscal quarter, is to grow 9% on an organic basis.

We're going from a 19% growth in the first quarter to 9% over the entire four quarters. Obviously, things are going to slow down substantially and I don't think you can really read much into the year-over-your growth in the first fiscal quarter for Medtronic.

Brian Orelli, PhD has no position in any of the stocks mentioned. Keith Speights has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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