Medtronic's stock drops after profit beats again but outlook disappoints

By Tomi Kilgore

Medtronic raises dividend for the 47th straight year, but only by a penny per share for the 2nd straight year

Shares of Medtronic PLC dropped Thursday, after the medical device and therapies company extended its streak of quarterly earnings beats for its fiscal fourth-quarter, but provided a disappointing outlook for the current quarter.

The company also raised its quarterly dividend, the 47th straight year the dividend was increased, but again by just a penny per share.

The stock (MDT) slumped 3.1% in midday trading, putting it on track for the biggest one-day selloff in seven months. That reverses a gain of as much as 1.3% in the premarket, soon after results were released at 6:45 a.m. Eastern.

Chief Executive Geoff Martha said "momentum is building into the new fiscal year," as new product cycles are beginning in some of the most attractive markets.

That said, Chief Financial Officer Karen Parkhill said on the post-earnings conference call with analysts, according to an AlphaSense transcript, that first-quarter adjusted earnings per share was expected to be $1.19 to $1.21. That's below the current FactSet consensus of $1.24.

For full fiscal 2025, adjusted EPS was guided to be $5.40 to $5.50, which surrounds the FactSet consensus of $5.45.

Regarding the dividend, the quarterly rate was raised to 70 cents a share from 69 cents a share. That followed an increase of 1 cent per share last year, and increases of 5 cents a share the previous two years.

Still, the new annual dividend rate implies a dividend yield of 3.37% at current prices. That compares with the implied yields for the Health Care Select Sector SPDR ETF XLV of 1.51% and for the S&P 500 index SPX of 1.38%.

"The yield from our growing dividend is an important component of the total return we generate for our shareholders," CFO Parkhill said. "It's worth noting that we've been able to grow our dividend by 30% over the past five years, and 130% over the past decade."

For the fiscal fourth quarter to April 26, net income fell to $654 million, or 49 cents a share, from $1.19 billion, or 88 cents a share, in the same period a year ago.

Excluding nonrecurring items, such as acquisition and restructuring costs, adjusted earnings per share of $1.46 topped the FactSet consensus of $1.45. That marked the eighth straight quarter of bottom-line beats.

Revenue grew 0.5% to $8.59 billion, above the FactSet consensus of $8.45 billion.

Within Medtronic's business segments, cardiovascular revenue fell 5.2% to $3.13 billion, just shy of the FactSet consensus of $3.14 billion.

Neuroscience revenue grew 5.6% to $2.55 billion, above expectations of $2.46 billion, amid strength in its cranial and spinal technologies and neuromodulation divisions.

Medical surgical revenue increased 3.5% to $2.2 billion, above expectations of $2.17 billion, fueled by strength in the general surgical technologies and blood-oxygen management businesses.

And diabetes revenue jumped 10.9% to $660 million, above analyst projections of $654 million.

Medtronic's stock has tacked on 8.4% year to date, while the SPDR health care ETF has advanced 7.1% and the S&P 500 has gained 11.5%.

-Tomi Kilgore

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05-23-24 1144ET

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