Sunday, February 10, 2019

A Current AIM International Equity Holding: Medtronic PLC (MDT, $87.78): “Medtronic Continues to Mesmerize” By: Clarissa Vazquez, AIM Student at Marquette University

Medtronic PLC (MDT, $87.78): “Medtronic continues to Mesmerize”
By: Clarissa Vazquez, AIM Student at Marquette University
Disclosure: The AIM Equity Fund currently holds this position. This article was written by myself, and it expresses my own opinions. I am not receiving compensation for it and I have no business relationship with any company whose stock is mentioned in this article.


         Medtronic Plc (NYSE: MDT) is one of the world’s largest technology leaders in the medical industry. MDT’s goal is to help create for a better quality of life for people all over the world by alleviating pain and increasing the overall quality of life.

         Medtronic Plc has four main segments. These are Cardiac and Vascular Group (38.2%), Minimally Invasive Technologies Group (27.4%), Restorative Therapies Group (26.6%), and Diabetes (7%).

          Medtronic Plc has strong potential for growth in the coming future. By restructuring their initiative called Enterprise Excellence Plan, it is projected to increase annual growth by $3 Billion.  

          Medtronic Plc is showing strong signs of stability within their Cardiac Rhythm and Heart Failure market. In the last quarter, they reported a 1.4% growth within this segment.

          Medtronic Plc recently purchased Mazor Robotics for $1.64 billion to help strengthen their Robotics Spine Surgery Business. This is a strategic fit to help grow their robotic machinery to become more accurate and become more modern.  

         Medtronic Plc’s overall revenue grew 15% last quarter. Their businesses within the emerging markets grew remarkably: China grew 13%, Eastern Europe grew 27%, the Middle East and Africa grew 20%, South Asia grew 14%, and Southeast Asia grew 9%. Overall, Medtronic Plc still believes that will be able to continue to grow their emerging markets.

         Medtronic Plc has grown since being added to the AIM portfolio which was bought on October 13, 2017, for $78.24 and is now currently trading at $87.78 showing a 12.19% increase from the initial purchase price.

Key points:

Medtronic Plc released Quarter 2 financial results on November 20, 2018. MDT saw a revenue increase of 6.1% of organic growth which was $7.481 billion. Medtronic Plc is planning on continuing to grow their medical heart products. They plan to do this in various ways. MDT plans on entering the Transcatheter Mitral Valve Replacement space which shows promising future revenues. Mitral valve regurgitation is a heart condition that occurs when blood flows back into the heart which affects 1.7% of the US population. It is believed that the transcatheter aortic valve replacement market will increase 19.7% by 2020. They also plan on continuing to grow their Micra Transcatheter Pacing System with the HeartWare International they purchased in 2017. Their Micra Transcatheter Pacing System is growing in the single high digits. They also saw success with their Azure wireless pacemaker which drove the topline growth for Arrhythmia Management.  

MDT updated their fiscal year 2019 guidance. They increased their organic revenue growth guidance which was 4.5% to 5% and is now 5% to a 5.5%. MDT’s operational outperformance in the first half of the fiscal year of 2019 has allowed them to absorb incremental expenses (which include the impacts of China tariffs and their current acquisition of Mazor). They also expect a constant EPS growth of a 9% to 10% for 2019.

What has the stock done lately?

Over the past 12 weeks, MDT has seen a change of -3.33% trading at $88.03 on February 4, 2019, and $90.96 on December 31, 2018. However, the company released Q4 earnings in November and upon doing so, the stock increased 6.22% from $92.97 on November 21st to $98.75 on December 1st.

Past Year Performance:

MDT has a 52 Week H/L of $100.15 - $87.77. They were trading as high as $100.15 in September of 2018 and as low as $82.45 at the beginning of January, representing a change of     -13.77%. As stated above, the company has since seen an increase in price since its slight drop. Overall, MDT is up 7.78% YoY as they were trading at $81.67 on February 4, 2018, and are now currently priced at $88.03.

         Source: FactSet

My Takeaway:

In terms of stock price, MDT faced some issues during the correction in October through the beginning of January; however, they are on a raise once again. They released positive FY2019 showing signs of continued growth and development. MDT continues to put a strong emphasis on growing their company through product innovation. Looking forward, they expect to continue to grow organically. MDT’s CEO, Omar Ishrak stated that they are leading in the fastest growing markets in medical technology and will continue to help develop and bring innovative new technologies to market, over the remaining of the year and into 2020.