Image source: Getty Images.

What happened

Shares of Medtronic (MDT -0.76%), one of the largest developers and manufacturers of medical devices in the world, tumbled as much as 11% during Tuesday's trading session, after it reported disappointing second-quarter earnings results and provided subpar guidance.

So what

For the quarter, Medtronic reported revenue of $7.35 billion, a 3% year-over-year increase on a constant currency basis. The company's flagship cardiac and vascular group grew sales by 3% on a currency-neutral basis, while minimally invasive therapies saw a 4% constant currency bump. Unfortunately, Wall Street had been counting on seeing Medtronic report $7.46 billion in quarterly revenue. Medtronic blamed new product launch delays for the revenue underperformance and suggested that they could continue in the near term.

In terms of profits, Medtronic generated adjusted EPS of $1.12, a 9% increase over the prior-year period. That was $0.01 better than Wall Street expected. If adjusted for currency fluctuations, Medtronic delivered 15% EPS growth and expects its adjusted EPS growth to remain near the low double digits for the foreseeable future.

Looking ahead, Medtronic stuck with its sales growth forecast of the mid-single digits on a constant currency basis, but it pushed its adjusted fiscal 2017 EPS guidance down to $4.55 to $4.60 compared with a consensus forecast of $4.65 on the Street. This guidance includes a negative foreign currency impact of $0.20 to $0.22 per share. 

Image source: Getty Images.

Now what

Medtronic's Q2 2017 report was certainly not what Wall Street and investors were looking for, but it's also not a genuine surprise, given the recent strength of the U.S. dollar and the general commoditization of the medical-device industry. The delay in new product launches, though, comes as a bit of a surprise, but it doesn't appear it'll be an issue beyond 2017.

In spite of Medtronic's weakness, there are still a number of catalysts that could push Medtronic higher over the long term. For instance, the U.S. Census Bureau is estimating that the elderly population in the U.S. will nearly double between 2012 and 2050. Elderly Americans are more likely to need medical devices to improve the quality of their life. Combined with lengthening life expectancies, this bodes well for Medtronic's future.

Innovation is also a key driver for Medtronic. It recently introduced the MiniMed 670G, which is the first approved artificial pancreas. The device, which uses a sensor with a protruding needle that's slipped under the skin to measure insulin levels, constantly monitors the blood sugar levels of Type 1 diabetics and injects insulin from a pump as needed. This game-changing device has blockbuster potential, and it's just one example of Medtronic's opportunity in the burgeoning cardiovascular and diabetes space.

Given that Medtronic could deliver upwards of $6 in EPS by 2020, and it's yielding a respectable 2.3%, today's drop should get the attention of value investors.