Medtronic (MDT) stock skidded early Tuesday after the medtech giant missed Wall Street’s January-quarter sales expectations, though profit came in well ahead of forecasts.
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The company blamed a change in U.S. distributor buying patterns for surgical instruments. Medical surgical sales declined by 0.4% organically and lagged projections by about 2.6%, Evercore ISI analyst Vijay Kumar said in a report.
“MDT noted this was inventory destocking and not share loss as end US hospital customer purchasing patterns was stable,” he said. “Acute monitoring was down [low single-digit percentage] due to 40% declines in respiratory related admissions.”
Medtronic stock tumbled more than 4% to 88.48 in premarket trades.
Medtronic Stock Falls On Revenue Miss
Across all products, sales rose 2.5% on a strict, as-reported basis and 4.1% organically to $8.29 billion. Organic growth lagged Medtronic’s forecast for 4.75%, Kumar said. Revenue missed the $8.33 billion estimate of analysts polled by FactSet.
Cardiovascular sales climbed 5% organically, in line with expectations, while neuroscience sales rose 5.2%, driven by a high-teens percentage growth in U.S. neuromodulation. Neuromodulation uses electrical signals to mask pain. Medtronic points to the strong launch of its spinal cord stimulator, Inceptiv. Brain modulation grew by a mid-20% range in the U.S.
Sales of diabetes devices surged 10.4% organically, beating expectations. This was the fifth straight quarter of double-digit growth, Kumar said. Medtronic sells insulin pumps and continuous glucose monitors, or CGMs.
“Interesting, MDT noted that it was investing heavily in its pipeline, including next gen patch pump and durable pumps,” Kumar said.
He kept his outperform rating and 104 price target on Medtronic stock.
Company Reiterates Its Outlook
Promisingly, Medtronic earned an adjusted $1.39 per share for the fiscal third quarter, above calls for $1.36 and the company’s own outlook for $1.35 to $1.37. Earnings jumped 7% year over year.
Medtronic reiterated its full-year guidance for 4.75% to 5% organic sales growth. The company also forecasts adjusted earnings of $5.44 to $5.50 per share. That includes a 5% impact from foreign exchange rates.
Medtronic stock broke out of a cup base with a buy point at 92.68 on Jan. 28. Shares immediately fell below their entry buy closed back in the buy zone on Friday, according to MarketSurge.
The premarket move Tuesday puts shares on deck to open below their buy point. But it’s not enough to trigger a sell rule. Savvy investors are encouraged to cut their losses when a stock falls 7% to 8% below its entry.
Follow Allison Gatlin on X/Twitter at @AGatlin_IBD.
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