Let's get something straight right off the bat -- Medtronic
The company had already warned us all about this quarter, so the results posted yesterday evening weren't surprising. Revenue was up a bit less than 8%, and while reported net income was up strongly, simple operating income was down about 1%.
Although the company does have definite growth opportunities in markets like spinal care, drug-eluting stents, and diabetes care, cardiac rhythm management is still the lead dog with Medtronic, accounting for close to half of sales. To that end, a great deal of investor attention will remain focused both on the underlying market conditions and the competitive behavior of Boston Scientific
I'm slightly bearish when it comes to ICDs. I don't doubt that millions of Boomers may get these devices, nor that ongoing clinical studies will continue to push their benefits. I simply believe that the penetration and exploitation of the ICD market has been pretty thorough already, and I think it will be increasingly difficult (and expensive) to push it much further.
Since management lowered guidance with this release, it's fair to think that there's a better chance of outperformance in the next few quarters, assuming the ICD market doesn't get worse. Additionally, management is now referring to 15% long-term growth as a goal, rather than an expectation.
Perhaps management is just sweeping the deck and trying to reestablish expectations at a more reasonable level, but investors may react poorly as stalwart growers transition to a less dynamic phase of life. Medtronic almost certainly still has growth ahead of it, and may be a decent idea for long-term investors. Nonetheless, I'd caution Fools not to automatically assume that past growth rates and valuation multiples can be easily reproduced in the future.
For more medical missives:
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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).