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Chronic Healthiness at Medtronic

Medical-equipment firm Medtronic (NYSE: MDT  ) isn't growing as fast as it once was, but Tuesday's fourth-quarter earnings report still managed to beat Wall Street's expectations. That clearly impressed more myopic-minded investors, but there are reasons for Fools with longer-term outlooks to take the company's pulse as well.

For the quarter, Medtronic posted 7% sales growth and a 15% jump in diluted earnings. Full-year results were similar: Sales grew 9%, and diluted earnings advanced 15%, excluding a couple of one-time litigation and restructuring charges.

Sales outside the U.S. grew 20%, and Medtronic experienced sales growth in every business segment except for Physio-Control. This tiny unit was just broken out from the largest segment this quarter, and its domestic shipments got suspended "to address quality systems issues." Medtronic saw notable strength in its vascular segment, which deals with blood vessel diseases and disorders, and in neurological products to treat chronic pain in the spine, brain, and nervous system.

Medtronic's largest division pertains to cardiac rhythm disease management, including pacemakers and defibrillators to help the heart beat properly. This segment grew only a couple of percent overall for the year, but expanded by double digits overseas.

Medtronic also currently lacks a serious contender in the drug-eluting stent market, currently dominated by archrivals Johnson & Johnson (NYSE: JNJ  ) and Boston Scientific (NYSE: BSX  ) , along with Abbott Labs (NYSE: ABT  ) . To remedy this gap, Medtronic's bringing the European-approved Endeavor to the U.S. Debate continues regarding drug-eluting stents' safety and effectiveness versus other treatments, but the area does have long-term appeal.

Medtronic's array of businesses and geographic breadth have earned it many years of double-digit sales and earnings gains. Tuesday's results also saw a return to operating cash flow growth, after a couple of years of weak cash flow generation. A recent stock run after the favorable earnings report put Medtronic back near its 52-week highs. The shares trade at just more than 19 times forward earnings, which seems reasonable, given the company's stellar track record and respectable long-term outlook. However, growth going forward probably won't be as robust as it has in the past.

However you cut it, Medtronic is a king of cash, and one of the more profitable firms out there. No wonder so many Fools continue to take its temperature.    

For related Foolishness:

Johnson & Johnson is an Income Investor recommendation. To see what other dividend-paying stocks James Early is recommending, check out Income Investor free for 30 days.

Fool contributor Ryan Fuhrmann is long shares of J&J, but has no financial interest in any other company mentioned. Feel free to email him with feedback or to discuss any companies mentioned further. The Fool has an ironclad disclosure policy.

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