Medtronic: Income Investor's Delight Available at a Discount




  • In Business
  • 2022-12-09 23:14:11Z
  • By GuruFocus.com

Medtronic PLC (NYSE:MDT) is an attractive stock for investors looking for solid and profitable options. The broad portfolio of medical devices, medications and services has been the driving force of the company's success.

One particular segment of this business that stands out is its cardiac treatments. Its commitment to providing innovations in this field can majorly contribute to future revenue growth and return on investment for shareholders.

  • Warning! GuruFocus has detected 5 Warning Sign with MDT. Click here to check it out.

  • MDT 15-Year Financial Data

  • The intrinsic value of MDT

  • Peter Lynch Chart of MDT


Additionally, the company's focus on shareholder returns provides investors with a unique opportunity to build a steady, long-term source of income. Given recent dips in the share price, investors looking for strong growth potential might consider Medtronic to be an attractive option.

Medtronic: Income Investor
Medtronic: Income Investor's Delight Available at a Discount  

Medtronic reaches critical milestone in Sphere-9 ablation catheter trial

On Dec. 6, Medtronic announced the finalization of enrollment for an important clinical trial of its cardiac ablation and mapping catheter, Sphere-9. With the help of the medical device, the study's goal is to examine an innovative therapy for a common heart condition. The catheter will be used to treat atrial fibrillation, which causes highly irregular pulse rates because of abnormal electrical impulses in the atria, two important chambers in the human heart.

Sphere 9 is being developed with the help of Affera, a company focusing on cardiac arrhythmia solutions that Medtronic acquired in August. The company's product portfolio is not yet available for sale.

Atrial fibrillation devices have a growing market that was valued at $10.2 billion in 2021. According to a report from Transparency Market Research, the market is expected to grow at a compound annual rate of 6% through 2031 to $18.5 billion. The launch of Sphere-9 and the rest of Affera's product portfolio could prove to be a significant growth catalyst for Medtronic.

Medtronic posts disappointing earnings

Medtronic reported its fiscal second-quarter 2023 results on Nov. 22. The company posted a year-over-year decline of 3.3% in revenue to $7.59 billion and missed analysts' estimates by $110 million. Even though the non-GAAP earnings per share of $1.30 outperformed expectations by 2 cents, they were still down 2% from the prior-year quarter. On top of that, GAAP earnings declined 67% year over year to 32 cents.

The revenue decline was caused by the non-U.S. developed market, which fell 13% year over year to $2.15 billion. It represents 28% of the company's total revenue. Additionally, the U.S., which accounts for 54% of Medtronic's revenue, recorded a 2% increase to $4.06 billion. The Emerging Markets segment, generating 18% of the company's revenue, reported a 1% decrease inorganically but a 4% organic increase. Revenue for the division stood at $1.35 billion.

Medtronic recently increased its revenue growth and earnings per share guidance for fiscal 2023. It expects organic revenue growth of 3.5% to 4% in the second half of the year. The company also projected full-year earnings per share to be between $5.25 and $5.30, including an 18-cent loss from foreign currency.

The state of the markets today is causing a lot of uncertainty for many investors. While not all news is good news, Medtronic's recent earnings disappointment had a bigger impact than perhaps it would have in a more sturdy market climate. With the financial markets in such a bearish mood, it is essential to consider the state of affairs when analyzing news like this. Investors cannot forget that although this news may seem bad, taking into consideration the overall market conditions can provide them with more insight as to whether or not this truly reflects the company's performance.

A history of significant shareholder returns

Medtronic is a delight for income investors. The dividend yield is an appealing 3.39%, and the company is only five years away from becoming a Dividend King as it has increased its dividend over the past 45 years.

When it comes to shareholder returns, the company focuses more on dividends. However, it does not shy away from share repurchases either. The company has bought back $500 million worth of stock year to date after returning $5.5 billion to shareholders through buybacks in fiscal 2022.

For Medtronic, offering dividends and share repurchases to its investors is a smart move, as it can help turn around any negative sentiment. When stock prices are low, having this extra incentive to remain invested can help inspire confidence that higher prices abound and increase investor morale. Furthermore, being able to invest in its operations is something shareholders greatly appreciate, especially during times of uncertainty. All in all, dividends and share repurchases are the perfect way for Medtronic to reward loyal investors.

Key takeaway

Medtronic's stock has been beaten down throughout the year and is now trading close to its 52-week low. This provides an attractive entry point for new investors. In addition, the company has a vast portfolio of medical devices, while its innovations and acquisitions related to cardiac treatment can evolve into significant money spinners for several years to come.

The most attractive part of Medtronic is its focus on shareholder returns. The company's commitment to return 50% of its free cash flow to shareholders makes it a potentially good opportunity for those looking for passive or post-retirement income.

Finally, Medtronic is a very attractive stock for value investors given its current multiples. The company has a strong product lineup and an excellent track record of innovations. From cardiovascular solutions to diabetes management devices and minimally invasive procedures, Medtronic is one of the leaders in advancing health care technologies that benefit patients around the world. Investors can be sure their investments will appreciate as the company continues to develop and implement new technology. With such a solid foundation for growth, Medtronic should remain an appealing option for most value investors.

This article first appeared on GuruFocus.

COMMENTS

More Related News

Diageo First Half 2023 Earnings: Beats Expectations
Diageo First Half 2023 Earnings: Beats Expectations

Diageo ( LON:DGE ) First Half 2023 Results Key Financial Results Revenue: UK£9.42b (up 18% from 1H 2022). Net income...

Should You Be Adding Van Elle Holdings (LON:VANL) To Your Watchlist Today?
Should You Be Adding Van Elle Holdings (LON:VANL) To Your Watchlist Today?

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even...

Rank Group First Half 2023 Earnings: UK£0.22 loss per share (vs UK£0.17 profit in 1H 2022)
Rank Group First Half 2023 Earnings: UK£0.22 loss per share (vs UK£0.17 profit in 1H 2022)

Rank Group ( LON:RNK ) First Half 2023 Results Key Financial Results Revenue: UK£338.9m (up 1.6% from 1H 2022). Net...

Wizz Air Holdings Reports Third Quarter 2023 Earnings
Wizz Air Holdings Reports Third Quarter 2023 Earnings

Wizz Air Holdings ( LON:WIZZ ) Third Quarter 2023 Results Key Financial Results Revenue: €911.7m (up 123% from 3Q...

IG Group Holdings First Half 2023 Earnings: EPS: UK£0.46 (vs UK£0.48 in 1H 2022)
IG Group Holdings First Half 2023 Earnings: EPS: UK£0.46 (vs UK£0.48 in 1H 2022)

IG Group Holdings ( LON:IGG ) First Half 2023 Results Key Financial Results Revenue: UK£513.9m (up 9.6% from 1H 2022...

Leave a Comment

Your email address will not be published. Required fields are marked with *

Cancel reply

Comments

Top News: Business