These are challenging times for even the best medical technology companies. Insurance companies, hospitals and national governments are pushing back hard on pricing, patient visits are down, and innovation seems stifled between modest clinical progress and a considerably more conservative FDA. Not surprisingly, then, Medtronic (NYSE:MDT) is delivering much less growth than long-term investors are accustomed to, and the near-term outlook is not looking especially strong.
The real question, though, is whether Medtronic can pull out of this rut. Even just a bit more growth at the top line would make this stock a value, but stagnant markets and the turmoil of the transition to a new CEO could keep a lid on the shares in the near term.
A Weak End to the Fiscal Year
Analysts were not expecting a great fiscal fourth quarter, but Medtronic's results were weak nonetheless. Reported revenue was flat on a constant currency basis, though adjusting for the extra week in the year-ago quarter would have bumped the growth rate to 2%. As this quarter shows, foreign sales are becoming increasingly important to Medtronic's growth. Foreign sales were up 7% (constant currency) to just under $2 billion, with emerging market growth coming in at 20%.
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