Medtronic
(NYSE: MDT)
stock continues to decline today — a day after it underwhelmed The Street with its growth projection for its new fiscal year.
MDT shares were down more than 2% to $81.58 apiece by midday today — a day after the stock fell another 2% in value. Meanwhile, MassDevice’s MedTech 100 Index — as well as the S&P 500 — were up on hopes that President Joe Biden and House Speaker Kevin McCarthy are close to striking a debt ceiling deal.
For the fiscal year ending in April 2024, Medtronic expects 4–4.5% revenue growth. One analyst described the guidance as “worse (more conservative?) than we expected.” Company officials told analysts during yesterday’s earnings call that they wanted to be prudent. They said they’re seeking durable revenue growth.
Even as it divests some businesses and engages in significant cost reductions including layoffs, Medtronic is also boosting R&D spending and tuck-in acquisitions. Just yesterday, it doubled down on its commitment to invest in its Diabetes business by announcing plans to spend $738 million to buy EOFlow and its tubeless, wearable and fully disposable insulin delivery device.
Medtronic officials predict they’ll be one of the first companies to the U.S. market with a pulsed-field ablation catheter — a technology that has generated excitement in the cardiology space when it comes to treating AFib. The company also reported positive momentum in rolling out its Hugo robotic surgery system internationally.
Many analysts, though, are keeping Hold or Neutral ratings on MDT shares for now.
Here is a summary of some analysts’ reports about Medtronic:
William Blair kept its Market Perform rating on MDT shares. Analysts Brandon Vazquez, Margaret Kaczor, Macauley Kilbane, Mike Arens, and Justin Lin said:
“While the guide disappointed, management continued to provide updates on its series of growth catalysts within the pipeline, notably within diabetes, with its 780G approval and acquisition of EOFlow announced in tandem with results. We believe accelerating top- and bottom-line growth is key for stock performance, though in our view, it may take several quarters (or longer) to see contribution from pipeline catalysts, and we continue look for further signs of management’s ability to hit the company’s long-term 5%-plus growth expectations.”
Truist kept its Hold rating. Richard Newitter, Samuel Brodovsky and Lin Zhang at Truist said they suspected that the fiscal year 2023–24 guidance baked in conservatism. However, they sought more confidence that Diabetes device launches — and other pipeline areas such as the Hugo robot-assisted surgery system and pulsed-field ablation — can drive growth at Medtronic.
BTIG stayed Neutral on Medtronic stock. Said Ryan Zimmerman, Sam Durno and Iseult McMahon at BTIG: “It would seem that MDT is taking a conservative approach after lackluster execution the past 12–24 months. That said, we think investors are not willing to give them the benefit until MDT puts up more consistent performance.”
Needham & Co. stayed with a Hold rating. Senior research analyst Mike Matson went with the headline: “Decent F4Q23, but FY24 guidance worse (more conservative?) than we expected.” He added: “While MDT’s guidance is likely conservative, continued macro headwinds mean that it’s unlikely to see EPS growth in FY24 even with some upside to guidance.”