Medtronic Slumps On Light Earnings Outlook; Announces $738 Million Buyout

The medical devices giant Medtronic, (MDT), beat expectations for the quarter on Thursday. It also announced a buyout of $738 million in the diabetes segment. However, MDT's stock fell on its weak earnings forecast.

Medtronic's fiscal 2024, beginning April 29, is expected to generate adjusted earnings of $5.10-$5.10/share. This is below analyst expectations of $5.19. Evercore ISI analyst Vijay Kumar said Medtronic had telegraphed its lighter outlook in advance. Edward Jones analyst John Boylan also agreed, saying it was appropriate to be conservative given all Medtronic's responsibilities.

Boylan stated in a client report that the company would be launching a diabetes product long awaited, facing a moderate but continuing cost inflation as well as increasing investments in research and development. The negative impact of the foreign exchange rate also played a part in the guidance.

Kumar also said that Medtronic expects organic sales growth of 4%-4.5%, which is in line to forecasts.

MDT shares fell 3.5% in premarket trading today near 84.50. MarketSmith.com reports that shares are above their 200-day and 50-day moving averags.

MDT Stock: Cardiovascular, Diabetes Beat

Medtronic's adjusted earnings per share for the fourth quarter of fiscal year 2008 were $1.57. The earnings increased by 3%, and exceeded expectations by two cents. Sales rose 5.6% to $8.54 Billion. FactSet polled analysts who expected sales of $8.26 billion.

The cardiovascular products are the largest segment of Medtronic. Sales increased 12% strictly as reported to $3.32 Billion, exceeding expectations. Sales grew organically by 6.5%. The sales of diabetes products were also higher than expected at $595 millions. The reported sales of diabetes products fell by a small amount, but organic sales rose by 3%.

Evercore's Kumar stated that sales of medical-surgical and neuroscience products were in line expectations.

Medtronic announced that it would also acquire insulin patch manufacturer EOFlow, for approximately $738 million. EOFlow, based in South Korea, makes a tubeless wearable and disposable insulin delivery system.

MDT has a Relative strength Rating of 60. This puts shares in the top half when it comes 12 month performance.