Note: Medtronic's fiscal year ends on April 30
Notably, MDT stock has underperformed the broader market in each of the last 4 years. Returns for the stock were -10% in 2021, -23% in 2022, and 10% in 2023. In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 24% in 2023 - indicating that MDT underperformed the S&P in 2021, 2022 and 2023.
Medtronic stock took a bigger hit compared to some of its peers, considering its higher exposure to the U.S. market (more than half of the total revenue), which became the epicenter of the crisis with the highest number of COVID-19 cases in the world.
However, the sales growth has stalled in recent quarters due to delays in the approval of new products in the U.S. Looking forward, there are high hopes for Medtronic's most advanced insulin pump system – MiniMed 780G – to drive its diabetes sales in the future. The product is now launched in the U.S.
Below are key drivers of Medtronic's value that present opportunities for upside or downside to the current Trefis price estimate for the company's stock:
Headquartered in Dublin, Ireland, Medtronic plc. supplies self-manufactured medical devices and therapies to treat more than 30 chronic diseases across 150 countries in the world. Medtronic operates in the following broad segments - Cardiac and Vascular Group (Cardiac Rhythm & Heart Failure, Coronary & Structural Heart, Aortic & Peripheral Vascular), Minimally Invasive Technologies Group (Surgical Solutions, Patient Monitoring, and Recovery), Restorative Therapies Group (Spine, Neuromodulation, Neurovascular, Surgical Technologies) and Diabetes Group. The company is a global leader in the Cardiac Rhythm Disease Management, Spinal, and Neuromodulation segments. Its main competitors are Johnson & Johnson, Boston Scientific, and Abbott.
Medtronic continuously launches new and innovative products in the market to retain or increase its market share. In 2018, the FDA approved Medtronic's Remodulin to treat patients with Pulmonary Arterial Hypertension. It also secured approval for Less-Invasive Heart Pump Implant Procedure for its HVAD system. These approvals should aid the future growth.
Through a few strategic acquisitions, Medtronic has expanded its business and increased its market share. It acquired Crospon, an endoscopic diagnostics company, in Feb 2018. Crospon offers tools to diagnose and measure gastroesophageal motility disorders. Earlier in 2015, Medtronic acquired Covidien for approximately $50 billion. In the past, it acquired Ardian for $800 million and Osteotech for $123 million in 2011 to boost its Cardiovascular and Spinal sales, respectively.
The COVID-19 pandemic resulted in the restricted movement of people across the globe in 2020. Most of the hospitals and healthcare institutions were focused on the treatment of COVID-19-related patients and working on emergency cases. As such, there was a decline in elective surgeries, which impacted Medtronic's sales. However, now that several countries have undertaken large-scale vaccination programs for COVID-19, the sales rebounded in recent years.
Medtronic is witnessing an increasing share of international sales that have mainly come from China, India, and Brazil. Medtronic's revenue from outside the U.S. accounted for 48% of its overall net sales in FY 2023.
Stringent healthcare regulations have implemented checks on the pricing structure of medical device companies, which is expected to negatively affect the profits of the industry.
