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Medtronic (MDT -2%) ticks lower today as sellers remain in control of the stock despite the medical device manufacturer delivering beats on its top and bottom lines in Q2 (Oct) while also raising its FY25 (Apr) guidance. MDT has slipped by roughly 7% since reaching one-year highs in late October. Currently, the stock is returning toward mid-August levels, searching for support at its 200-day moving average (84.49).

What was the central issue in Q2? MDT's Cardiac Ablation Solutions (CAS) segment recorded flat yr/yr sales growth in the quarter, missing internal expectations of accelerating sequential growth. New product sales failed to outpace legacy product sales due to a third-party component supplier interruption. MDT mentioned that this supplier has since expanded capacity, allowing it to ramp up new product availability and activate new accounts. However, this minor setback raised concerns about MDT achieving its projected double-digit growth in this business in Q3 (Jan), generating today's moderate selling pressure.

• Aside from the blemish in CAS, MDT delivered consistency in Q2. EPS grew by 1% yr/yr to $1.26, exceeding analyst estimates for the tenth straight quarter. Revs rose by 5% to $8.4 bln, accelerating from the +3% delivered last quarter and topping consensus for the eighth consecutive quarter.
• Strength was spread across MDT's highest growth (20% of revs), established market (50%), and synergistic businesses (30%). In highest growth, which includes CAS, total revs ticked 8% higher in the quarter, supported by Structural Heart, Diabetes, and Hypertension divisions. Established market, vital to MDT's financial model, delivering consistent revenue growth, mid-single digit sales were bolstered by Cranial & Spinal Technologies and Cardiac Rhythm Management. Synergistic businesses grew at a similar pace, underscored by Neuromodulation.
• MDT is confident its diversified growth will continue, raising its FY25 EPS outlook to $5.44-5.50 from $5.42-5.50 and organic revenue growth forecast to +4.75-5.00% from +4.50-5.00%. A business MDT is growing excited about is Hypertension, noting that the condition is the leading cause of cardiovascular disease globally. This makes it a market for the company's Simplicity blood pressure procedure to thrive in, as it plays a critical role in cost-effectively managing hypertension.

MDT is known for its steady quarterly performances, and Q2 was no exception. However, investors are expressing modest discontent over the missed CAS sales growth prediction in the quarter. Meanwhile, with many of MDT's devices dependent on Medicare reimbursement, potential cuts could significantly hurt future growth. That said, MDT remains a healthcare stock worth keeping on the radar given its established credibility in the healthcare sector, capacity for further tuck-in acquisitions, and stable 3.3% annual dividend yield.