Medtronic (MDT) Sinks 6% on Disappointing Earnings and Guidance as Macro Issues Weigh, Analyst Warns Issues Might Not Resolve 'Near Term'

Shares of Medtronic plc (NYSE: MDT) fell 6% in early trading Thursday after missing on the top and bottom-line in its fourth quarter and providing weaker guidance as macro factors hit the medtech giant.

Fourth quarter non-GAAP diluted EPS rose 2% to $1.52 but fell shy of Wall Street estimates of $1.57.

Revenue fell 1% to $8.089 billion versus the consensus estimate of $8.44 billion. U.S. revenue fell 2% in the quarter to $4.097 billion.

"Global supply chain and COVID-19 controls in China created acute impacts to our results in the fourth quarter.," CEO Geoff Martha said. He added that they understand the root causes, are addressing them, and expects they will resolve over the near-term.

Looking ahead, the company sees 2023 non-GAAP EPS in the range of $5.53 to $5.65, which compares to the consensus of $5.66. The company expects organic revenue growth in its fiscal year 2023 in the range of 4% to 5%.

"We expect recent and upcoming product launches to make a difference across our businesses this coming fiscal year," said Karen Parkhill, Medtronic chief financial officer. "Supply chain, inflation, and foreign exchange are expected to create near-term pressure. Yet, we remain focused on driving our R&D investments to accelerate our growth and create large, long-term returns for our shareholders."

The company also announced that it approved an 8% increase to its quarterly cash dividend for the first quarter of fiscal year 2023. The new dividend is $0.68 per quarter, of $2.52 per year.

Medtronic bought back $5.5 billion in stock in fiscal 2022 and remains committed to returning a minimum of 50 percent of its free cash flow to shareholders, primarily through dividends and share repurchase.

"Our substantial dividend increase reflects the confidence of our Board of Directors and executive management in Medtronic's financial strength and future earnings power," said Martha. "We've increased our dividend for the past 45 years and growing our dividend is an important component of the total return we generate for our shareholders."

While the company expects the macro issues to resolve near-term, Goldman Sachs analyst Amit Hazan is not quite sure. "[W]e think is not a prudent assumption in the current environment," he said.

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