Medtronic PLC: Strong Gains and Great Momentum
Medtronic PLC (NYSE:MDT), a medical device company that is helping fight America’s opioid addictions, has seen its share price trend steadily higher throughout the year. On September 19, MDT stock hit a new all-time intra-day 52-week high of $111.73, for a year-to-date gain of 26.1%.
Despite these strong gains, Medtronic stock is really just getting started. It may be one of the world’s largest medical technology companies, but there is one thing holding it back.
No, it’s not the cost; most medical insurance plans cover the company’s minimally invasive devices. The biggest obstacle facing Medtronic PLC is exposure. There’s a lack of a basic understanding in the medical profession of what the company’s pain therapies do and how they actually work.
All that is changing though; the company has kicked off an education program, meeting with general practitioners, presenting at conferences, providing classes, and hosting town-hall meetings.
Last year, Medtronic held a town hall meeting that was attended, both in-person and online, by 7,000 people. On September 6 of this year, 3,500 people attended a second town hall meeting. (Source: “Medtronic’s biggest obstacle in the fight against opioids? Lack of awareness.” Minneapolis/St. Paul Business Journal, September 19, 2019.)
MDT Stock Overview
Dublin-based Medtronic PLC is a medical technology company that serves physicians, hospitals, and patients in more than 150 countries. Ireland is a popular base for American companies because of its low taxes, but the majority of Medtronic’s revenues come from the United States. (Source: “Facts and Statistics,” Medtronic PLC, last accessed September 19, 2019.)
The company has four operating segments, the largest of which is its $11.4-billion “Cardiac and Vascular” group. Its “Minimally Invasive Therapies” group has annual sales of $8.7 billion, its “Restorative Therapies” group has $7.7 billion, and its “Diabetes” group has $2.1 billion.
The subgroup that has, arguably, the greatest area of growth, is “Pain Therapies,” which is within the Restorative Therapies group. According to Medtronic, its treatments for chronic pain, which affects 100 million Americans (about 30% of the country’s population), can replace the need for addictive pills, including opioids.
And the Pain Therapies division is quite young, having been formed just a little more than three years ago. The division has created devices that treat chronic pain. Whereas opioids only cover up the pain, Medtronic’s devices actually eradicate it.
The company currently has three ways to treat chronic pain: implantable spinal cord stimulation, implantable drug pumps, and balloon kyphoplasty (a balloon that is filled with bone cement). (Source: “Treatment & Therapies,” Medtronic PLC, last accessed September 20, 2019.)
Best of all, the pain device market is seriously underrepresented. And the reasons aren’t what one might think. The cost of these devices is covered by most insurance companies, and because the operations are minimally invasive, patients don’t need to spend a costly night in the hospital.
Medtronic’s kyphoplasty is gaining some traction, but the other treatments are only in single-digit percentages for market penetration. Hence the need to educate professionals and potential customers about the benefits of the company’s chronic pain solutions.
Medtronic’s chronic pain therapies account for approximately four percent of the company’s total revenue, but they’re growing at a rate of between 10% and 20% annually. (Source: Minneapolis/St. Paul Business Journal, op. cit.)
MDT Stock Information
|Market Cap||$150.2 Billion|
|Shares Outstanding||1.3 Billion|
|50-Day Moving Average||$105.87|
|200-Day Moving Average||$96.44|
(Source: “Medtronic plc (MDT),” Yahoo! Finance, last accessed September 12, 2019.)
Medtronic stock has had great momentum in 2019, rising more than 26% year-to-date. It has been on this trajectory for a number of years; since the start of 2012, the stock has soared approximately 240%.
MDT Stock does not make huge, market-trouncing, monthly gains, but it has been rewarding buy-and-hold investors for a long time. And by all accounts, it should continue to do so.
Chart courtesy of StockCharts.com
Solid First-Quarter Results
In August, Medtronic PLC announced its financial results for the first quarter of fiscal 2020, ended June 30, 2019. Total revenue increased by 1.5% year-over-year to $7.5 billion. (Source: “Medtronic PLC Q1 FY2020 Earnings Presentation August 20, 2019,” Medtronic PLC, August 20, 2019.)
First-quarter revenue from the U.S., which accounted for 52% of revenue, increased 1.4% to $3.9 billion. Revenue from non-U.S. developed markets, which accounted for 32% of total revenue, slipped 1.2% to $2.4 billion. Revenue from emerging markets, representing 16% of the company’s revenues, increased 7.5% to $1.2 billion.
First-quarter net income was $864.0 million, or $0.64 per share. First-quarter adjusted net income increased six percent year-over-year to $1.7 billion, or $1.26 per share.
Looking ahead at fiscal 2020, Medtronic management reiterated its revenue growth guidance and raised its earnings guidance. Total revenue is forecast to grow by about four percent. Non-GAAP earnings are forecast to rise by $0.10 per share, to a new range of $5.54 to $5.60 per share.
Medtronic PLC has been making major inroads when it comes to addressing chronic pain and the opioid addiction problem.
The company reported solid first-quarter results, with revenue growth, adjusted earnings-per-share (EPS) growth, and operating-margin expansion above expectations. As a result of its first-quarter performance, the company raised its full-year EPS guidance.
Trading hands at about $111.00 per share, Medtronic stock is not the kind of equity that is going to soar 80% in a year. But if history (and the obvious need for chronic pain solutions that are non-addictive) is any indicator, Medtronic has a compelling, long-term growth story.