Medtronic sloughed off some of the recent malaise surrounding medical devices companies on Tuesday as MDT stock popped on fiscal first-quarter earnings that beat views as it raised its outlook.
Devices stocks have been under pressure since mid-July amid the growing popularity of weight-loss drugs from Novo Nordisk. Experts say broader insurance reimbursement of the so-called GLP-1 drug class could undercut sales of treatments and devices for maladies related to weight, like diabetes.
In the July quarter, Medtronic delivered mixed news on this front. Overall, its diabetes segment grew 6.3% organically, bringing in $578 million in sales. That beat expectations for $547.7 million, according to FactSet. Earlier this year, the company launched a new insulin pump system called MiniMed780G. The U.S. launch led to low-30% growth in durable pump sales.
But overall U.S. sales of diabetes devices fell 8.7%.
Still, on today's stock market, MDT stock jumped 2.6% to close at 83.72.
MDT Stock: Diabetes Segment Highlighted
Across all its products, Medtronic's sales grew 6% organically to $7.7 billion and topped forecasts for $7.57 billion. Adjusted earnings climbed 6% to $1.20 per share and beat expectations by 7 cents a share.
Evercore ISI analyst Vijay Kumar said the growth in diabetes devices highlighted Medtronic's fiscal first quarter.
"Overall U.S. (diabetes sales were) down by a high single-digit percentage on lower consumable sales due to lower installed base," he said in a note to clients. "But the pump growth is a leading indicator and points to diabetes turning around with new pump sales driving consumable growth."
Cardiovascular sales also surged 6.2% organically, hitting $2.85 billion vs. MDT stock analysts' view for $2.78 billion. Edward Jones analyst John Boylan noted Medtronic is benefiting from increased demand "post-pandemic and good business execution."
Positive Outlook Isn't Reflected
But Boylan says the positive outlook isn't reflected in MDT stock. He says positive internal advances at Medtronic give him "confidence in our long-term view."
"These include streamlining its operations, investing more in research and development, supply-chain improvements and others," he said in his note to clients. "It may take a few more good quarters for some to appreciate the improvements within Medtronic, but we believe the changes are becoming apparent."
Medtronic also raised its outlook for the year. The company now expects to earn an adjusted $5.08 to $5.16 per share, up 7 cents at the midpoint from its prior estimate. Further, Medtronic calls for 4.5% organic sales growth. Previously, the company saw 4% to 4.5% growth.
MDT stock analysts had called for earnings of $5.05 per share and $32.17 billion in sales.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
