Medtronic stock slumped Tuesday despite beating fiscal second-quarter expectations after a supplier issue impacted its cardiac ablation division.
Cardiac ablation is a minimally invasive procedure to treat irregular heart rhythm. The whole unit had flat sales. Pulsed field ablation — which uses electrical pulses to treat abnormal heart rhythm — had "strong growth," helping offset declines in cryoablation. Cryoablation uses extreme cold to destroy abnormal tissue.
"New product sales in cardiac ablation solutions did not offset the slower sales of legacy products," Edward Jones analyst John Boylan said in a client note. "New product sales were negatively affected by a supplier disruption that may be behind it."
Medtronic stock fell 3% to 85.01. Medtronic stock broke out of a flat base with a buy point at 91.49. Savvy investors are encouraged to cut their losses when a stock falls 6% to 7% below the entry. Medtronic stock is roughly 7% below its buy point.
Medtronic Stock: Diabetes Remains Strong
Across all products, Medtronic's sales climbed 5.3% on a strict, as-reported basis to $8.4 billion, beating the forecast of analysts polled by FactSet for $8.28 billion. Organically, sales increased 5%. Adjusted earnings also rose 1% to $1.26 per share, topping expectations by a penny.
Diabetes sales did well, Boylan noted. Revenue from that segment jumped 12.4% on a reported basis and 11% organically to $686 million. Evercore ISI analyst Vijay Kumar said analysts called for a slightly lower $663 million. Kumar projected $658 million in sales.
He has an outperform rating and 104 price target on Medtronic stock.
Importantly, Medtronic is teaming up with Abbott Laboratories to loop its insulin pumps with Abbott's continuous glucose monitors. U.S. sales should accelerate when this happens, Boylan said. He expects that move to occur in the next year or two.
"Overall, we believe Medtronic has a solid lineup of new offerings that include heart-repair products, diabetes products, an ongoing launch of a surgical robot outside the U.S. and other new devices," he said. "These, along with internal improvements, should help growth. We don't believe this positive outlook is reflected in shares."
Medtronic also raised its guidance and now expects sales to increase by 4.75% to 5% organically and for adjusted earnings to come in at $5.44 to $5.50 per share. Analysts forecasted $5.45 earnings per share and $33.63 billion in sales.
Medtronic stock fell early Tuesday after the medtech company reported adjusted earnings of $1.26 per share on $8.4 billion in fiscal second-quarter sales.
On average, analysts polled by FactSet expected Medtronic to earn $1.25 per share on $8.28 billion in sales.
During the year-earlier period, Medtronic earned $1.25 a share and reported $7.98 billion in sales.
The company raised the low end of its guidance for the year and now expects sales to increase by 4.75% to 5% organically. Medtronic also calls for $5.44 to $5.50 in adjusted earnings per share. Analysts forecasted $5.45 earnings per share and $33.63 billion in sales.
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