Medtronic Stock: Growth On Rise of the Cardiovascular Machines

September 09, 2024 at 08:42 AM EDT

Medtronic stock price

Medtronic plc (NYSE: MDT) is a leading global medical device maker in the medical sector. Its innovative and critical medical device portfolio addresses chronic diseases an aging population suffers. This assures longevity and a wide moat, which explains how the company has been a dividend aristocrat, having consistently raised its dividend for 47 years.

Shares have recently hit 52-week highs but remain a value trading at just 16.46X forward earnings, well below competitors Boston Scientific Co. (NYSE: BSX) trading at 38X, Abbot Laboratories (NYSE: ABT) trading at 24.43X and Stryker Co. (NYSE: SYK) trading at 29.91X forward earnings.

Aging Population and the Acute Care Boom

Medtronic will continue to benefit from the secular tailwinds of an aging population and the surge in acute care. As people get older, they are more prone to chronic diseases like diabetes, heart conditions, chronic pain, neurological disorders and spinal conditions like degenerative disc disease.

While drugs are used and being developed to treat these conditions, machines in the form of medical devices are becoming more relevant than ever. The medical device market is expected to swell to $772.9 billion by 2029. The cardiovascular device segment is still the fastest compound annual grower due to the rise in heart disease as the leading cause of death in the United States.

Medtronic’s Rise of Its Machines Treat Chronic Diseases

To understand Medtronic’s wide moat and growth runway, a simple game of concentration matching the disease to the medical device can be administered.

For cardiovascular diseases, Medtronic offers a range of electronic devices like pacemakers, defibrillators, catheters, stents and heart valves. Revenues rose 5.5% YoY to $2.0007 billion in fiscal Q1 2025. Cardiac Rhythm and Failure (CRHF) growth of high-single-digit was driven by its Micra transcatheter pacing systems and PulseSelect pulsed field ablation (PFA) system.
For diabetes, Medtronic supplies a number of electronic continuous glucose monitoring (CGM) devices and electronic insulin pumps. Its revenues climbed 11.8% YoY to $647 million in fiscal Q1 2025. The adoption of its MiniMed 780G automated insurance delivery (AID) system drove mid-teen growth in the United States.
For chronic pain, Medtronic has muscle and spinal cord stimulation devices and electronic drug delivery systems. Medtronic's neurostimulators are deep brain stimulation devices like the Percept RC deep brain stimulator with Brainsense Technology used to treat neurological disorders like movement disorders like dystonia, essential tremors and Parkinson’s Disease.

Medtronic has an extensive portfolio of devices and equipment encompassing advanced surgical technology to urological treatments.

A Steady Eddie Dividend Aristocrat on a Solid Trajectory

Medtronic reported fiscal Q1 2025 EPS of $1.23, beating consensus estimates by 3 cents. Revenues rose 3.4% YoY to $7.97 billion, beating $7.90 billion consensus estimates. The company saw growth accelerate in Cardiac Ablation Solutions and Neuromodulation with continued strength in Diabetes, Spine and Structural Heart products.

Medtronic Issues In-Line Guidance

The company provided in-line guidance for the fiscal full-year 2025, with EPS expected between $5.42 to $5.50 versus $5.44 consensus estimates. This was actually raised from its previous guidance of $5.40 to $5.50. Medtronic raised its fiscal full-year 2025 organic revenue growth guidance to 4.5% to 5%, up from a previous range of 4%.

Medtronic CEO Geoff Martha commented, "We executed, exceeded our commitments, and delivered another good quarter. Our underlying markets are healthy, we're driving operating rigor, and new product innovation is fueling diversified growth across key health tech markets. As we deliver innovation and execute our transformation, we expect this to translate into strong returns for our shareholders."

MDT Stock Triggers a Bull Flag Breakout Pattern

A bull flag forms after a sharp run-up, peak and parallel channel form the flag comprised of lower highs and lower lows. When the stock surges through the upper descending trendline, then the bull flag is triggered.

Medtronic Stock chart

MDT's flagpole surged to peak at $90.13 before the flag formed comprised of a parallel descending upper trendline and descending lower trendline. The bull flag was triggered when MDT spiked through the $88.73 upper trendline resistance. The daily relative strength index (RSI) went flat just under the 70-band. Fibonacci (Fib) pullback support levels are at $88.73, $86.49, $84.52 and $81.21.

Medtronic’s average consensus price target is $92.92, and its highest analyst price target sits at $106.00.

Actionable Options Strategies: Bullish investors can buy on pullbacks using cash-secured puts at the fib pullback support levels to buy the dip and write covered calls to execute a wheel strategy for income on top of the $3.11 annual dividend yield.

A Poor Man’s Covered Call (PWCC) strategy is a less capital-intensive way to collect income, which involves buying deep in-the-money (ITM) back-month calls or even LEAPS and selling out-of-the-money (OTM) front-month calls. The Theta erosion on the back-month calls is slower than the front-month calls to enable premium income. Don't use margin on the options contract, as you'll pay margin interest.

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