Medtronic Launches New Product

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Recently, Medtronic (MDT – Analyst Report) strengthened its portfolio of surgical products by launching Midas Rex Legend EHS Stylus Touch high-speed electric drill for spinal, cranial and orthopedic surgical procedures. The device, based on the company’s Integrated Power Console (IPC) system, is meant to provide surgeons with improved intraoperative functionality.

Medtronic’s Surgical Technologies business develops products and therapies to treat diseases of the ear, nose and throat (ENT), and certain neurological disorders. Moreover, this segment manufactures and markets products that facilitate surgical planning during cranial, spinal, sinus and orthopedic surgeries.

Several product launches and strong growth in monitoring and image guidance systems led to a 16.2% year-over-year growth in revenues of the Surgical Technologies segment to $273 million during the fourth quarter of 2010. Besides, an improvement in hospital capital spending resulted in an increase in order flow that was pending for the past few quarters due to economic uncertainty.

In fiscal 2010, this segment generated $963 million in sales, up 11% at constant exchange rates compared with 2009. International operations accounted for 38% of the revenues generated by the segment.

Apart from Surgical Technologies, Medtronic’s other business segments include Cardiac Rhythm Disease Management (CRDM), Spinal, CardioVascular, Neuromodulation, Diabetes and Physio-Control.

Medtronic has grown through several acquisitions. We are impressed with the company’s strong balance sheet, which augurs well for prospective acquisitions. The company exited fiscal 2010 with $1.4 billion in cash and cash equivalents, up from $1.3 billion at the end of fiscal 2009. Based on a strong cash balance, Medtronic rewards its shareholders with consistent dividend payments and share buybacks. We are pleased to note that over the last four years, dividend has more than doubled.

Medtronic recently raised its first-quarter 2011 dividend by 9%, to 22.5 cents from 20.5 cents. However, the company is highly exposed to the unpredictable movement of foreign exchange and operates in a highly competitive market. We maintain our Neutral recommendation on Medtronic.

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