Medtronic boosts guidance by adding growth to an impressive dividend

Medical device manufacturer Medtronic PLC New York Stock Exchange: MDT is a dividend aristocrat in the medical and healthcare industries. The medical device maker has increased its dividend payout for 46 consecutive years through bull and bear markets. Medtronic products cover numerous treatments and specialties, including diabetes management, neuromodulation, deep brain stimulation devices for chronic pain management, patient monitoring and diagnostics. Its pacemakers, catheters and defibrillators, along with stents and valve repair and replacement devices, are the main drivers of its largest segment, cardiovascular. The aging population provides a continuing advantage that has allowed the company to continue to grow.

Cardiovascular devices are the main revenue driver

Its cardiovascular products generate the lion’s share of Medtronic’s sales, generating more than 36% of total revenue. It provides a stable revenue stream, and the entire cardiovascular device industry is expected to generate a compound annual growth rate (CAGR) of nearly 8% year-over-year through 2032. Its main competitor is Abbott Laboratories Inc. NYSE: ABT, which became a major player when it acquired St. Johns Medical and its portfolio of pacemakers and stents. Medtronic’s cardiovascular portfolio includes Structural Heart and Aortic (SHA), Coronary and Peripheral Vascular (CPV), and Cardiac Rhythm and Heart Failure (CRHF) divisions.

Inventing the first portable pacemaker

Medtronic may be best known for its wearable pacemakers. In 1957, an electrical engineer from the University of Minnesota Department of Surgery, Earl Bakken, invented the first battery-powered portable pacemaker in collaboration with Dr. C. Walton Lillehei, who discovered that the heart’s electrical system could be induced to function correctly with the aid of electrical impulses sent through electrodes connected directly to the heart tissue.

By 1958, the wearable pacemaker was used in local hospitals with great success and acceptance, causing a surge in demand for the device to help non-surgical cardiac patients. Working with his brother-in-law Palmer Hermundslide, they founded Medtronic, which introduced implantable pacemakers in 1960. Over the years, Medtronic continued to evolve and expand its portfolio of cardiovascular products and devices to become one of the world’s leading medical device manufacturers .

Stable earnings

Medtronic reported fiscal third-quarter 2024 non-GAAP diluted earnings per share of $1.41, beating consensus estimates of $1.26 by 15 cents. Revenue grew 4.7% year-over-year to $8.1 billion versus consensus estimates of $7.95 billion. The organic revenue results highlight continued momentum driven by robust growth in the Core Spine, Diabetes, Cardiac Surgery, Cardiac Pacing and Structural Heart divisions. Diabetes-related revenues increased 12.3% year-over-year to $640 million.

Growth by portfolio segments

Its cardiovascular portfolio increased revenue 6.1% year over year to $2.929 billion. This includes a low double-digit organic increase in SHA, a mid-single-digit increase in CPV, and a low single-digit increase in CRHF.

Its neuroscience portfolio grew revenue 4.8% year over year to $2.355 billion. The medical surgical portfolio, which includes Patient Monitor and Respiratory Intervention (PMRI) and Surgical and Endoscopy (SE), experienced revenue growth of 3.9% year-over-year to $2.148 billion.

Exit from the ventilator business

Medtronic will exit the ventilator product line by merging its remaining PMRI businesses into a single unit called Acute Card and Monitoring (ACM). The ventilator product line became increasingly unprofitable. The company will continue to honor existing ventilator contracts.

Raise the guide forward

Medtronic gave upward guidance for full-year 2024 EPS of $5.19 to $5.21, up from previous forecasts of $5.13 to $5.19, compared to analysts’ estimates of consensus of $5.16. Full-year 2024 revenue is forecast to grow 4.75% to 5%, rising 4.75% or $32.71 billion to $32 billion versus consensus estimates of 32, 07 billion dollars.

Geoff Martha, CEO of Medtronic, commented: “Our recent major product approvals, including transformative products in diabetes, cardiac rhythm management, neuromodulation, hypertension and pulsed field ablation spaces, increase our confidence in driving reliable growth in the coming quarters and years.”

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The daily candlestick chart for MDT illustrates a cup pattern that completed retest of the lips line near $89.03 on January 12, 2024. The cup lips line started at $89.03 on July 26, 2023 , sinking to a low of $68.27 on October 30, 2023. MDT formed a rounded bottom as the stock rallied to retest the $89.03 cup lip line on January 31, 2024. The stock recovered to $82.65 before triggering a market structure low (MSL) at $85.01. MDT could form a handle as it prepares for a potential cup and handle breakout. The daily relative strength index (RSI) is moving just above the 50 band. The pullback support levels are at $81.24, $77.60, $75.01, and $73.01.

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