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Reasons Medtronic Buy

I wrote an article in late October that it was time to add shares for Medtronic. However, Medtronic’s (MDT) stock price continued a downward trend pressured by concerns about rising infection rates and the impact on hospital procedure and elective surgery volumes. In addition, Medtronic received a warning letter from the Food and Drug Administration [FDA] related to its diabetes business; more on that below. As a result, the stock price was hammered. However, the market reaction was overdone. Medtronic remains a global leader in medical devices with a broad product portfolio and strong moat. In addition, the company has a new CEO who is focused on the pipeline. Furthermore, Medtronic is a long-time dividend growth stock with 44 years of dividend increases and consistently returns cash to shareholders. Therefore, I outline three reason why I view Medtronic as a long-term buy.

FDA Warning Letter

Medtronic received an FDA warning letter on December 9th, 2021, about its diabetes business. The company disclosed the letter on December 15th, and shares dropped further. The FDA has not yet released the actual letter, but according to the press release by Medtronic,

The warning letter was issued following an inspection that concluded in July 2021 related to recalls of the MiniMed™ 600 series insulin infusion pump, and a remote controller device for MiniMed™ 508 and Paradigm™ pumps.

The warning letter focuses on the inadequacy of specific medical device quality system requirements at the Northridge facility in the areas of risk assessment, corrective and preventive action, complaint handling, device recalls, and reporting of adverse events.

Medtronic indicated they are committed to fully resolving all observations as quickly as possible. In addition, the company is implementing corrective actions and process improvements.


The drop in stock price…

Disclosure: Long MDT

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