MDT: Been Around 52 Week Low

MDT: Medtronic
Current Price: $47.59
Est Market Cap: $56.8 Billion
Est P/E (LTM): 22.75
Est P/E (current): 19.4
52 Week Range: $46.41 - $59.87

Medtronic, Inc. is engaged in medical technology. The Company functions in seven operating segments that manufacture and sell device-based medical therapies. Its operating segments include Cardiac Rhythm Disease Management (CRDM); Spinal and Navigation; Neurological; Vascular; Diabetes; Cardiac Surgery, and Ear, Nose and Throat (ENT).

I've sporadically followed MDT in the past. One of those "good companies that you always looking for the right time to get in". Has that time come? I've seen the stock discussed in a couple of outlets as of late and most of the its coverage has recently turned to "Buy/Outperform" with 12-month price estimates ranking from anywhere between $60 and $67.

For example:

* Argus upgraded to a Buy just last week.

* Goldman Sachs rates MDT an Outperform

* Standard & Poor's rates 4 STARS (out of 5) since May 24, 2006

* Reuters Research Rating of 34 brokers is OUTPERFORM with a range of B

S&P says:

The shares historically commanded a forward P/E premium to large cap medical device peers, but are currently priced in line with peers. In our view, the stock warrants a premium due to MDT's balanced revenue base, dominance in cardiac rhythm management and potential in the drug-coated coronary stent market. Our 12-month target price is $60, or 24.5X our FY 07 EPS estimate, translating into a forward PEG ratio of 1.5X, a modest premium to the large cap device group.

The following is some commentary from an Argus Report:

Medtronic, the world's largest maker of pacing and cardiac rhythm devices, reported
fiscal 4Q06 net income of $747 million or $0.62 per share, compared to $194 million or $0.16 per share in the year-ago period. Excluding one-time charges, net income and EPS grew 16% and 17%, respectively. Revenue increased 11% to $3.1 billion. Excluding a negative foreign currency impact of $69 million, revenue grew 13%. Sales in the U.S. grew 11%, while international sales grew 10% (or 17% in constant currency). Medtronic appeared to have gained share in the market for implantable cardioverter defibrillators (ICDs) over St. Jude Medical as well as Boston Scientific, which acquired Guidant and its ICD business.

For the most part, every product line showed improvement. Sales of cardiac rhythm
management (CRM) devices increased 10.5% year-over-year to $1.4 billion. Within the
CRM category, sales of ICDs increased 12% overall (14% on a constant currency basis) to $768 million. In the United States, ICD sales grew 9% year-over-year to $580 million and internationally they grew 25% to $188 million. Management estimates that MDT's share of the global ICD market is now 53%, up one percentage point from 3Q06 and up three points year-over-year. Pacing sales rose 7% to $467 million, after falling 1.2% in 3Q06.

Spinal and Navigation sales grew 16% year-over-year to $618 million, after rising 18%
in 3Q06. Neurological sales grew 9.3% to $282 million, after rising 6% in 3Q06. Sales of neuromodulation devices grew 17% to $240 million. Vascular sales, which includes
coronary stents, grew 17% to $273 million. Coronary stent sales of $114 million included $59 million in sales of the Endeavor drug eluting stent. Diabetes sales grew 5%, ENT sales grew 7.1%, while Cardiac Surgery sales declined 1.1%.

Gross margin improved to 75%, up 40 basis points from fiscal 2005 and 20 basis
points from 3Q06. R&D spending increased 19% to $294 million, accounting for 9.6% of
revenue. The company intends to complement internal R&D activities with the acquisition of technology and intellectual property. SG&A spending increased 13.7%, or slightly faster than revenue, to $975 million. Spending increased to expand the CRM sales force, with particular focus on reps calling on referral physicians.

For fiscal 2006, net income was $2.55 billion or $2.10 per share, compared to $1.80
billion or $1.48 per share in 2005. Revenue increased 12% (13% on a constant currency
basis) to $11.3 billion. Foreign currency translation had a $118 million negative impact.

EARNINGS & GROWTH ANALYSIS
Given the strong 4Q performance, MDT management increased its FY07 and FY08
guidance. For FY07, the company expects EPS of $2.40-$2.48, including $0.12 per share
of stock option expense, compared to its earlier forecast for $2.50-$2.55, excluding option expense. Taking into account these expenses and the effect of a recent convertible debt offering, this revision raises the guidance by $0.02 on low end of the range and by $0.05 on the high end. The company maintained its 2007 revenue guidance at $12.5-$13 billion, implying year-over-year growth of 11-15%.

For fiscal 2008, the company revised guidance to $2.78-$2.88, including $0.12 per
share of option expense, from a prior $2.88-$2.98, essentially boosting its forecast by two cents. It also kept its revenue guidance at $14-$15 million, implying growth of 14-18% from 2007 targets.

We are encouraged by management's increased guidance. We believe that it suggests
that the underlying demand for cardiac devices, spinal implants, and other medical devices is healthy. Looking forward, we think that Medtronic will get greater contributions from ENT (eye, nose and throat), neuromodulation and spinal product lines. Meanwhile, the company is expanding its cardiac devices sales force, focusing on reps that call on referral physicians. Moreover, Medtronic is increasing its R&D spending while investing to acquire technology and intellectual property.

For these reasons, we have effectively raised our fiscal 2007 EPS estimate by $0.06 to $2.44. (We note, however, that in contrast with our prior published estimate of $2.50, our current forecast assumes $0.12 of stock-option expense.) For FY08, we are establishing a preliminary estimate of $2.83 per share, also including $0.12 of option expense. Our dividend estimates are $0.43 per share for fiscal 2007 and $0.45 for fiscal 2008.