Medical devices giant Medtronic beat quarterly expectations on Thursday and announced a $738 million buyout in the diabetes segment, but MDT stock slumped on its light earnings forecast.
For fiscal 2024, which began April 29, Medtronic expects to earn an adjusted $5-$5.10 per share. That's below analyst projections for $5.19. But Evercore ISI analyst Vijay Kumar says Medtronic telegraphed this lighter outlook well in advance, and Edward Jones analyst John Boylan says it's appropriately conservative "given all that Medtronic has on its plate."
"This includes launching a long-awaited diabetes product, facing moderating but ongoing cost inflation and increasing investments in (research and development), as well as costs associated with simplifying and improving its operations," Boylan said in a report to clients. "The negative impact of foreign exchange also played a role in guidance."
Medtronic also expects sales to grow 4%-4.5% organically, which is in line with forecasts, Kumar said.
On the stock market today, MDT stock fell 4.5% to 83.54. Shares are well above their 50-day and 200-day moving averages, according to MarketSmith.com.
MDT Stock: Cardiovascular, Diabetes Beat
During the fiscal fourth quarter, Medtronic earned an adjusted $1.57 per share. Earnings inched up 3% and beat expectations by two pennies. Sales climbed 5.6% to $8.54 billion. Analysts polled by FactSet expected just $8.26 billion in sales.
Medtronic's biggest segment is its cardiovascular products. Sales grew 12% on a strict, as-reported basis to $3.32 billion, topping expectations. Organically, sales rose 6.5%. Sales of diabetes products also beat views at $595 million. Diabetes sales fell a fraction on a reported basis, but edged up 3% organically.
Medical-surgical and neuroscience sales were in line with expectations, Evercore's Kumar said.
Medtronic also announced it will acquire insulin patch maker EOFlow for about $738 million. EOFlow is based in South Korea and makes a tubeless, wearable and fully disposable insulin delivery device.
MDT stock has a middling IBD Digital Relative Strength Rating of 60, putting shares narrowly in the top half of all stocks when it comes to 12-month performance.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
