Company Reports

Narrow-moat Medtronic wrapped up its fiscal year with solid fourth-quarter results. With full fiscal year performance hitting very close to our estimates and our projections for fiscal 2025 bounded by management’s outlook, we’re holding steady on our fair value estimate. Reported annual revenue growth of 3.6% nearly hit our projection for 3.7% on the nose. Medtronic slightly exceeded our expectations on cost containment, but this was offset by incrementally higher amortization. The firm continues to see strength from pockets of innovation, including its Micra leadless pacemakers, the 780g insulin pump, and the limited launch of its Simplera Sync continuous glucose monitor in a handful of European countries. With key products approaching or in the early stages of commercialization, we’re more comfortable that Medtronic can maintain its mid-single-digit revenue growth goal.

Medtronic's standing as the largest pure-play medical-device maker remains a force to be reckoned with in the med-tech landscape. Pairing Medtronic's diversified product portfolio aimed at a wide range of chronic diseases with its expansive selection of products for acute care in hospitals has bolstered Medtronic's position as a key partner for its hospital customers.

Wide-moat Medtronic delivered solid fiscal third-quarter results, and with the firm running slightly ahead of our projections on the top line, we’ve adjusted our revenue assumptions upward incrementally for the full year. However, this wasn’t enough to materially move our valuation, and we’re leaving our fair value estimate unchanged.

Medtronic posted strong fiscal 2024 second-quarter results that put it on track to meet our full-year expectations, and we’re leaving our $112 fair value estimate unchanged. We think this quarter demonstrated more progress on the firm's larger objective of matching market growth. Organic revenue growth of 5% was fueled by strength in stent grafts for abdominal aortic aneurysm, the digital Aible system for spine procedures, and GI Genius, which incorporates artificial intelligence to better detect polyps during colonoscopy. Importantly, Medtronic recently obtained regulatory approval on several emerging technologies that we see as key growth drivers. These innovative new products reinforce the intangible assets that support Medtronic’s wide economic moat.

Medtronic posted solid fiscal first-quarter results that held few surprises and put the firm on track to meet our full-year expectations. We’re leaving our $112 fair value estimate unchanged, and although management raised its outlook, our fiscal 2024 projections remain bounded by the new range Medtronic provided. The firm also benefited from easing foreign exchange headwinds and solid pricing gains that largely offset inflationary pressure. We remain confident in Medtronic’s wide economic moat, which is supported by intangible assets underpinning its various technology platforms.

Medtronic's standing as the largest pure-play medical-device maker remains a force to be reckoned with in the med-tech landscape. Pairing Medtronic's diversified product portfolio aimed at a wide range of chronic diseases with its expansive selection of products for acute care in hospitals has bolstered Medtronic's position as a key partner for its hospital customers.

Wide-moat Medtronic posted solid fiscal fourth-quarter results that hinted at how management’s efforts over the last few years to reshape the organization and shift its portfolio toward faster growth are beginning to bear fruit. However, management’s tempered outlook for fiscal 2024 seems to have weighed on the shares. Considering that the firm finished the year very close to our expectations, we’re leaving our $112 fair value estimate unchanged.

Wide-moat Medtronic received highly welcome news today as the U.S. Food and Drug Administration has (finally) approved the firm’s next-gen 780g insulin pump, and we’re leaving our $112 fair value estimate unchanged. We’d originally anticipated it might take longer for FDA approval, considering the ongoing complication of the firm’s warning letter related to an earlier insulin pump that has yet to be fully resolved. However, this kind of timing difference means moving up commercialization of the 780g pump in our model by one year to fiscal 2024, and that makes little difference to our forecast cash flows that extend over the next 20 years.

Medtronic's standing as the largest pure-play medical-device maker remains a force to be reckoned with in the med-tech landscape. Pairing Medtronic's diversified product portfolio aimed at a wide range of chronic diseases with its expansive selection of products for acute care in hospitals has bolstered Medtronic's position as a key partner for its hospital customers.

Wide-moat Medtronic’s fiscal third-quarter results offered marked sequential improvement over anemic second-quarter performance. With the firm on track to meet our full-year expectations, we’re leaving our fair value estimate unchanged. Organic third-quarter revenue grew 4% year over year, fueled by strength in cardiac rhythm and heart failure, neuromodulation, and structural heart. Though Medtronic has been affected by factors outside its control—like shortages of chips and resins, hospital staffing challenges, and China’s volume-based procurement program—some of these elements have eased and allowed some green shoots to emerge. We surmise the pockets of strength in the more elective product categories reflect some normalization of nonpandemic healthcare utilization. Nonetheless, we remain cautious about whether this quarter’s mid-single-digit growth can be maintained. We think this will depend on further commercialization of new products as well as the planned divestitures of some slower-growing, mature businesses.

Medtronic delivered disappointing fiscal second-quarter results, and we’re lowering our fair value estimate to $112 per share, down from $122, after adjusting our full-year and fiscal 2024 estimates downward. In the second quarter, the firm faced challenges that have dragged down growth, some of which were specific to the firm and others that have affected the entire industry. In the former bucket, Medtronic struggled with supply shortages in surgical innovations, delayed U.S. regulatory approval of the 780g insulin pump, and battery replacement headwinds in neuromodulation. In the latter bucket, unfavorable foreign exchange rate changes, higher input costs, hospital staffing issues that have pulled down procedure volume, and China’s volume based procurement, or VBP, program have also put pressure on Medtronic. Considering these issues are unlikely to resolve themselves within the next few quarters, we’ve pulled back our projections for fiscal 2023-24. Despite these short-term hurdles, we think Medtronic’s wide economic moat remains intact, as its intangible assets and switching costs have not weakened, in our view.

Medtronic's standing as the largest pure-play medical-device maker remains a force to be reckoned with in the med-tech landscape. Pairing Medtronic's diversified product portfolio aimed at a wide range of chronic diseases with its expansive selection of products for acute care in hospitals has bolstered Medtronic's position as a key partner for its hospital customers.

Following somewhat disappointing data from the remaining pivotal renal denervation trial from Medtronic, we’ve lowered our fair value estimate by $7 to $122 per share after adjusting downward our expectations for renal denervation to drive growth over the 2024 to 2027 timeframe. The latest OnMed Symplicity Spyral results fell short of its primary endpoint—lowering ambulatory blood pressure compared with a sham procedure among patients on hypertension medication—and might feel like a repeat of Medtronic’s disappointing first pivotal trial back in 2014, we think there are some important distinctions this time around that investors should appreciate. Further, just as the pivotal trial failure eight years ago failed to impair Medtronic’s wide economic moat, we think the latest round of trial data hasn’t hurt Medtronic’s competitive advantage.

Medtronic's standing as the largest pure-play medical device maker remains a force to be reckoned with in the med-tech landscape. Pairing Medtronic's diversified product portfolio aimed at a wide range of chronic diseases with its expansive selection of products for acute care in hospitals has bolstered Medtronic's position as a key partner for its hospital customers.

Wide-moat Medtronic’s plan to spin off its patient monitoring and respiratory innovations businesses strikes us as strategically sound and underscores CEO Geoff Martha’s ongoing efforts to turn the firm’s portfolio toward faster-growing markets. Our fair value estimate is unchanged at $129 per share. If anything, we anticipate that the separation of these two product segments should leave Medtronic with greater concentration of differentiated technologies with significant opportunities for innovation, physician preference items, and a portfolio that should be further insulated from price pressure.

Medtronic posted fiscal 2023 first-quarter results that exceeded FactSet consensus expectations but ran slightly behind our full-year estimates. However, our adjustments to near-term projections weren’t enough to materially shift our fair value estimate. Compared with the larger medical device market, Medtronic’s quarterly 3% revenue decline in constant currency trailed growth at other industry leaders. One factor appears to be Medtronic’s relatively larger portfolio of electronic devices where manufacturing has been hampered by microchip shortages that are expected to remain challenging through the calendar year. Nonetheless, we remain confident of Medtronic’s wide economic moat and see evidence of it at work in the quarter.

Wide-moat Medtronic reported fiscal fourth-quarter and full-year results that largely met our expectations for fiscal 2022, despite falling short of consensus, based on FactSet. We’ve made minor adjustments to our projections for fiscal 2023 to reflect greater foreign exchange headwinds and supply chain challenges, but these weren’t material enough to shift our valuation and we’re standing by our fair value estimate. Similar to what we’ve seen at other medical technology firms, the chip shortage and challenges procuring resins have affected Medtronic’s business. While we view these issues as near-term speedbumps, they have introduced additional uncertainty for fiscal 2023, from our perspective. On a more positive note, procedure volume seems to have returned to prepandemic levels, which reassures us that demand remains solid. On a preliminary basis, we’ve been hearing from practitioners that they are seeing patients return after pandemic delays in worse shape, suggesting that delayed care has led to greater burden of disease that might accelerate the intensity of healthcare consumption.

Medtronic's standing as the largest pure-play medical device maker remains a force to be reckoned with in the med-tech landscape. Pairing Medtronic's diversified product portfolio aimed at a wide range of chronic diseases with its expansive selection of products for acute care in hospitals has bolstered Medtronic's position as a key partner for its hospital customers.

Medtronic posted fiscal 2022 third-quarter results that held no surprises, and we’re leaving our fair value estimate intact as the firm is on track to meet our full-year estimates. We made slight downward adjustments on our projections for fiscal 2023 following measured comments by management about expected headwinds, including foreign currency, higher-than-normal inflation, and the impending acquisition of Affera. Nonetheless, since we value the company over two decades to reflect its wide economic moat, these tweaks to next year were immaterial to our valuation. With Medtronic's shares currently trading at a 22% discount to our intrinsic value and its dividend yield pushing up to 2.5%, we think conditions are attractive for long-term investors.

Medtronic shares were pummeled Dec. 15 on the news of a warning letter issued by the Food and Drug Administration for one of the company's diabetes device manufacturing facilities. Since the actual Form 483 hasn’t yet been released by the FDA, the scope of observations and implications for time frame and effort necessary to remediate remains hazy, and we’re holding steady on our fair value estimate for now. Nonetheless, we think the market has overreacted; the 7% drop in share price implies that diabetes revenue would be halved in fiscal 2022--essentially all products pulled from the market for the second half of the fiscal year--followed by another four years where Medtronic’s market share is permanently impaired and averages just over half of the firm’s previous share of insulin pumps. Based on the numerous regulatory situations we’ve seen, we think such a scenario is highly unlikely. Likewise, we see little in the way of implications for Medtronic’s wide economic moat, which has sustained a number of product recalls and warning letters over the last two decades but has been able to overcome them on the strength of its engineering prowess and innovation as well as strong relationships with providers.