Analyst Note
| Debbie S. Wang |Medtronic got off to a solid start in fiscal first quarter that featured a nice recovery from the relatively weak prior-year period. We’re holding steady on our fair value estimate as these early results are generally consistent with our full-year projections. Medtronic’s atypical fiscal quarter timing, which includes July, provides a better peek into how the rise of the Delta variant has damped procedure volume growth as the summer unfolded. Thus far, it appears the effect has been felt most strongly in certain U.S. geographies that have been characterized by low vaccination rates but has had a modest impact on the firm overall. Management expects this pandemic pressure on volume to peak in September, and we concur based on how the Delta variant has played out in the U.K. and India. Despite these near-term speedbumps, we remain confident in Medtronic’s wide economic moat. We were pleased to see R&D investment accelerate in first quarter, which should continue through the second quarter. Medtronic’s ability to increase R&D spending at this scale allows it to support significant pipeline programs that reinforce the wide moat and which we expect will drive future growth, including renal denervation and extravascular implantable cardioverter defibrillators.