Medtronic PLC (NYSE: MDT) saw its fiscal first-quarter sales and earnings per share (EPS) both come in ahead of the consensus estimates, led by solid U.S. growth (7% excluding an extra selling week). New product flow remained a driver. On the macro front, management believes overall hospital volumes remain strong as well.

Despite market concern, growth in China saw improvement sequentially for Medtronic. While currency headwinds are preventing more of a drop-through to the bottom line here in the first half of fiscal 2016, Oppenheimer expects margin expansion in the second half as those headwinds ease and as Covidien synergies scale-up. Medtronic is using its improved U.S. cash access post-Covidien to build out the pipeline and continue its top-line momentum. And the brokerage firm looks for double-digit EPS growth over the next couple of years as Covidien expense synergies ramp.

Emerging markets growth has remained robust, and Twitter noted the devices market in China has remained stable. A change in sales channels in Saudi Arabia (a joint venture) depressed fiscal first-quarter growth, but management reiterated its expectation of double-digit growth through the second half of fiscal 2016.

With more access to U.S. cash post-Covidien, Medtronic is taking the opportunity to invest in the pipeline with several technology acquisitions. Nine deals have been announced since the Covidien deal closed.

Gross margin of 69.3% was essentially in line with Oppenheimer’s estimate, as was selling, general and administrative expenses at 33.7%. Research and development investment at 7.7% was slightly higher than expectations, which led operating margin to fall about 50 basis points below the brokerage firm’s estimate. Management reiterated goal of $300 million to $350 million in Covidien synergies in fiscal 2016.

As a result, Oppenheimer has an Outperform rating with a $86 price target, implying upside of 25% from current prices.

Shares of Medtronic were down 1.5% to $68.93 Friday morning. The stock has a consensus analyst price target of $86.69 and a 52-week trading range of $55.54 to $79.50.

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