Medtronic Stock Keeps Ticking Forward

Medical device maker Medtronic NYSE: MDT stock is trading down (-14%) for the year. Medtronic is the world’s largest medical device maker with a portfolio of glucose monitors, stents, insulin pumps, pacemakers, and catheters. It serves patients in over 150 countries. The Company makes medical devices to treat chronic diseases including cardiovascular, renal, and diabetes along with neuroscience and medical surgical segments. Procedure volumes have returned to pre-COVID levels. The Company has historically maintained stable growth through bull and bear markets as its has continued to raise its dividend consistently for 45 years. The Company’s biggest pain point was supply chain disruption in China being the largest contributors to the fiscal Q4 2022 shortfall. Further headwinds included raw materials shortages, inflationary and FX impacts, which the Company may partially mitigate with the launch of new products this year. The Company recently received FDA approval for its UNiD Spine Analyzer v4.0 planning platform which provides predictive models for surgeons performing lower lumbar spine surgery. It is the first Company in the U.S. to receive FDA clearance for predictive models for spine surgery. Abbott NYSE: ABT is the major competitor with its pacemakers and stents thanks to the acquisition of rival St. James Medical. It also competes with Abbott’s blood glucose monitor FreeStyle Libre which doesn’t require a fingerstick pin pricks for a reading. Boston Scientific NYSE: BSX is also a fierce competitor in the medical devices segment. Medtronic has a 2.85% dividend yield and is trading at 12.5X forward earnings. The CEO stated that its robust pipeline and upcoming catalysts will results in a strong second half of the calendar year. Prudent investors seeking exposure in the medical devices segment can watch for opportunistic pullbacks in shares of Medtronic.

Q4 Fiscal 2022 Earnings Release

On May 26, 2022, Medtronic released its fiscal fourth-quarter 2022 results for the quarter ending April 2022. The Company reported an earnings-per-share (EPS) profit of $1.52 excluding non-recurring items versus consensus analyst estimates for a profit of $1.56, missing estimates by ($0.04). Revenues fell (-1.2% year-over-year (YoY) to $8.09 billion beating analyst estimates for $8.43 billion. Medtronic CEO Geoff Martha commented, "Global supply chain and COVID-19 controls in China created acute impacts to our results in the fourth quarter. We understand the root causes, we're addressing them, and we expect them to resolve over the near-term. We remain keenly focused on delivering innovation-driven growth with a robust pipeline of technologies in fast-growing markets, and we're committed to creating strong shareholder value through strategic capital allocation and active portfolio management."

Downside Guidance

Medtronic lowered its fiscal full-year 2023 EPS of $5.53 to $5.65 versus $5.75 consensus analyst estimates. Organic growth is expected between 4% and 5%.

Conference Call Takeaways

CEO Martha stated that procedure volumes returned to pre-COVID levels by the end of the quarter. The two biggest contributors to the shortfall in the quarter was COVID lockdowns in China and global supply chain challenges. Raw materials shortages adversely affects its Surgical Innovations segment. Medtronic has a new global structure in place which consolidates previous fragmented operations and supply chain functions. More work is being done to ultimately arrive at a more resilient end-to-end global supply chain that will give the Company a competitive advantage. CEO Martha believes the Company will have a strong back half of the year. The Company will contributes its Renal Care Solutions business into a new company in partnership with DaVita. This will bring the Company up to $400 million in value when the transaction closes at the end of the 2023 calendar year. The Company has conducted over 300 clinical trials and received over 200 regulatory approvals in the U.S. Europe, Japan and China.

MDT Opportunistic Pullback Levels

Using the rifle charts on the weekly and daily time frames provides a precision view of the landscape for MDT stock. The weekly rifle chart downtrend is attempting to hold above the $87.84 Fibonacci (fib) level and trigger the weekly market structure low (MSL) buy signal above the $90.51 level. The weekly rifle chart downtrend stalled with a flattening 5-period moving average (MA) at $90.09 and 15-period falling at $97.05. The weekly stochastic is attempting a mini pup towards the 20-band. The weekly lower Bollinger Bands (BBs) sit at $78.30. The daily rifle chart is attempting to breakout as the daily 5-period MA at $89.37 attempts to cross up through the daily 15-period MA at $89.34. The daily 50-period MA sits at $94.28 and 200-period MA at $106.21. The daily BBs are in a compression as the upper and lower BBs are tight and flat at $92.02 and $86.89, respectively. The daily stochastic is rising through the 50-band. Prudent investors can watch for opportunistic pullbacks at the $87.84 fib, $85.12 fib, $84.13 fib, $81.66, $78.63 fib, $75.71 fib, $73.47, and the $72.13 fib level. Upside trajectories sit at the $103.55 fib level up towards the $122.97 fib level. Keep an eye on competitors' ABT and BSX stock price action to gauge sentiment.