Stock of the Day - December 5, 2022

Medtronic (MDT)

$90.82

-$0.41 (-0.4%)

Market Cap: $116.77B

About Medtronic

Medtronic plc develops, manufactures, and sells device-based medical therapies to healthcare systems, physicians, clinicians, and patients worldwide. Its Cardiovascular Portfolio segment offers implantable cardiac pacemakers, cardioverter defibrillators, and cardiac resynchronization therapy devices; cardiac ablation products; insertable cardiac monitor systems; TYRX products; and remote monitoring and patient-centered software.

It also provides aortic valves, surgical valve replacement and repair products, endovascular stent grafts and accessories, and transcatheter pulmonary valves; and percutaneous coronary intervention products, percutaneous angioplasty balloons, and products. The company's Medical Surgical Portfolio segment offers surgical stapling devices, vessel sealing instruments, wound closure, electrosurgery products, surgical artificial intelligence and robotic-assisted surgery products, hernia mechanical devices, mesh implants, gynecology and lung products, and various therapies to treat diseases, as well as products in the fields of minimally invasive gastrointestinal and hepatologic diagnostics and therapies, patient monitoring, airway management and ventilation therapies, and renal disease. Its Neuroscience Portfolio segment offers products for spinal surgeons; neurosurgeons; neurologists; pain management specialists; anesthesiologists; orthopedic surgeons; urologists; urogynecologists; interventional radiologists; ear, nose, and throat specialists; and systems that incorporate energy surgical instruments. It also provides image-guided surgery and intra-operative imaging systems and robotic guidance systems used in robot assisted spine procedures; and therapies for vasculature in and around the brain. The company's Diabetes Operating Unit segment offers insulin pumps and consumables, continuous glucose monitoring systems, smart insulin pen systems, and consumables and supplies. The company was founded in 1949 and is headquartered in Dublin, Ireland.

Medtronic Bull Case

Here are some ways that investors could benefit from investing in Medtronic plc:

The company recently reported earnings per share (EPS) of $1.55, exceeding analyst expectations, which indicates strong financial performance and potential for growth.
Medtronic plc achieved a revenue of $9.81 billion for the quarter, surpassing estimates, reflecting robust demand for its medical technology products.
The firm has set its fiscal year 2027 guidance at an EPS range of 5.900-6.000, suggesting confidence in future profitability and growth.
With a current stock price around $100, the company offers a dividend yield of 3.1%, providing investors with a steady income stream through its quarterly dividend payments.
Medtronic plc has a strong return on equity of 14.51%, indicating effective management and the ability to generate profits from shareholders' equity.

Medtronic Bear Case

Investors should be bearish about investing in Medtronic plc for these reasons:

The company reported a decrease in EPS from $1.62 in the same quarter last year, which may raise concerns about declining profitability.
Medtronic plc's net margin stands at 13.20%, which, while positive, may be lower compared to industry peers, indicating potential challenges in cost management.
The dividend payout ratio is currently at 77.21%, suggesting that a significant portion of earnings is being distributed as dividends, which could limit reinvestment in growth opportunities.
Analysts forecast an EPS of 5.94 for the current fiscal year, which is slightly below the company's guidance, indicating potential challenges in meeting growth expectations.
Market conditions and regulatory changes in the healthcare sector could impact Medtronic plc's operations and profitability, introducing uncertainty for investors.

S&P 500 Component DexCom Set For Further Price, Earnings Growth

Written By Kate Stalter on 11/13/2022

Medical device maker DexCom (NASDAQ: DXCM) has been trading in a fairly tight range recently, holding gains from the company’s third-quarter report in late October.

The stock is up 16.33% in the past month. Even before the 19% gap-up following the earnings report, DexCom was already beginning to trend higher.

In the past three months, DexCom has advanced 31.41%. It’s not the top performer within the medical device industry in the past 12 months, however. A large cap with top performance is Abiomed (NASDAQ: ABMD).

Smaller medical gear makers with outstanding price action include TransMedics Group (NASDAQ: TMDX) and Lantheus (NASDAQ: LNTH). Numerous small companies have also posted excellent price performance in the past year, making the entire sub-industry a rising leader within the broader healthcare sector.

Fellow large caps Medtronic (NYSE: MDT), Stryker (NYSE: SYK), Boston Scientific (NYSE: BSX), and Edwards Lifesciences (NYSE: EW) are all underperforming DexCom.

S&P 500 component DexCom makes glucose monitors for diabetes patients. That may sound like an established line of business without much need for innovation, but DexCom is busy creating more opportunities.

In the third quarter, the company earned 0.28 per share on revenue of $770 million. Those were gains of 27% and 18% respectively. DexCom beat views on both the top and bottom lines.

Expanding Its Market

In the quarter, DexCom initiated the international rollout of its new sensor, G7. The product was launched in the United Kingdom, Ireland, Germany, Austria, and Hong Kong. It’s also received inclusion for healthcare reimbursement in several U.K. markets, which will likely help expand market share.

The G7 is a wearable device that helps diabetics track blood-sugar levels.

DexCom is focusing on making its continuous glucose monitors, known as CGMs, available to a bigger group of patients. Medicare and Medicaid rules may change, to allow patients needing one daily dose of insulin to get reimbursement for CGMs. If insurance companies follow the government's lead, and they typically do, that could be a boon for DexCom revenue.

In the third-quarter earnings release, DexCom CEO Kevin Sayer also cited strong momentum in the company’s U.S. business.

The company also updated its full-year revenue guidance. The company expects:

Revenue in a range of approximately $2.88 to 2.91 billion, which would be growth of 18% to 19%
Non-GAAP gross profit margin of approximately 64%
Non-GAAP Operating Margin of approximately 16%
Adjusted EBITDA Margin of approximately 25%

DexCom’s earnings growth has lagged others in its industry. The most recent quarter marked the first time in the past eight that the company posted earnings growth. Make no mistake: DexCom has been profitable every year since 2018, but earnings declined in 2021, to $0.66 per share, down from 2020’s $0.78 per share.

Analysts See Earnings Growth Ahead

For the full year 2022, Wall Street is eyeing earnings per share of $0.80, which would be a 21% increase. Next year, analysts expect net income of $1.11 per share, up 39%.

MarketBeat analyst data for DexCom reveal a “moderate buy” rating on the stock, with a price target of $120.24, just 3.94% below where it’s currently trading.

The DexCom chart shows that a rally attempt out of a cup-with-handle pattern broke down in April. The subsequent consolidation undercut the prior structure low, sinking to a nadir of $67.11 in mid-June when it began gradually etching the right side of the current consolidation.

The stock closed Friday at $115.96, down $3.88 or 3.24%. It finished the session below its 10-day moving average, but the stock is squarely in buy range, now that it’s pulled back from its November 1 high of $123.36.

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