Market Mad House

In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche


Is Medtronic (MDT) Making Money?

Healthcare stocks are hot now, but many popular healthcare companies, such as Regeneron (REGN) do not make money. Medtronic (MDT) however makes money.

Medtronic PLC (NYSE: MDT) reported a quarterly gross profit of $4.002 billion and a quarterly operating income of $673 million on 31 July 2020. Notably, Medtronic’s quarterly gross profit rose from $3.733 billion on 30 April 2020. However, Medtronic’s quarterly gross profit fell from $5.317 billion on 31 January 2020.

Moreover, Medtronic’s quarterly operating income fell from $1.639 billion on 31 January 2020 but rose from $316 million on 30 April 2020. Thus, Medtronic is making less money in 2020.

In addition, Medtronic’s quarterly revenues fell from $7.717 billion on 31 January 2020 to $5.997 billion on 30 April 2020. However, Medtronic’s quarterly revenues rose back to $6.507 billion on 31 July 2020.

Is Healthcare growing in 2020?

Thus, Medtronic which manufactures many surgical devices has seen its revenues and profits fall in 2020. Hence, I think Medtronic disproves the popular idea that healthcare will grow in 2020.

Overall in 2020, Medtronic’s share price fell from $114.56 on 2 January to $110.13 on 16 October to $108.48 on 18 October. Thus, Mr. Market has little faith in basic healthcare’s ability to grow.

Conversely, Mr. Market loves companies with experiment coronavirus treatments such as Regeneron Pharmaceuticals (REGN). Regeneron manufactures an experimental drug cocktail that doctors at the Walter Reed Army Medical Center gave to President Donald J. Trump (R-Florida). However, the drug cocktail lacks Food & Drug Administration (FDA) approval so Regeneron cannot sell it to the public.

In 2020, Regeneron’s share price rose from $373.35 on 2 January to $599.74 on 16 October and fell to $583.14 on 19 October. I think biotech stocks such as Regeneron are in a bubble but basic healthcare companies such as Meditronic are not.

How Much Cash Does Meditronic Generate?

Meditronic (MDT) generates less cash. Meditronic’s quarterly operating cash flow fell from $2.407 billion on 31 January 2020 to $1.45 billion on 30 April 2020 to $278 million on 31 July 2020.

In contrast, Meditronic’s quarterly ending cash flow rose from -$253 million on 31 January 2020 to $431 million on 30 April 2020 to $6.499 billion on 31 July 2020. Meditronic finished the last quarter with an enormous amount of cash.

However, Meditronic is borrowing more cash because its ending cash flow rose from -$1.310 billion on 30 April 2020 to $1.959 billion on 31 July 2020. Thus, I think Meditronic borrowed $1.959 billion on in the quarter ending on 31 July 2020.

Meditronic began 2020 with $11.628 billion in cash and short-term investments on 31 January 2020. That amount fell to $10.948 billion on 30 April 2020 and rose to $13.012 billion on 31 July 2020. Thus, Meditronic is a cash rich company.

What Value Does Meditronic Have?

Meditronic (NYSE: MDT) had a lot of value in the form of $93.906 billion in total assets on 31 July 2020.

I think Mr. Market accurately valued Meditronic at $110.10 on 16 October 2020. That value is correct because of the cash it has and the Total Assets.

Meditronic is a good dividend stock. It paid a 58₵ a quarterly dividend on 16 October 2020. Overall, estimates Meditronic shares offered an annualized dividend of $2.32 and a 2.16% dividend yield on 16 October 2020.

I think consider Meditronic a value investment in healthcare because it pays a good dividend, and is cash-rich. Additionally, Meditronic relies on boring but vital surgical products rather than unproven biotechnological breakthroughs for revenue.

What is Meditronic?

Moreover, Meditronic (MDT) manufactures products that people need to use if they want to live. For example, cardiac monitors, electrosurgical hardware, insulin pump systems, hysteroscopy systems, and endoscopy products.

Demand for some of those products, including insulin pump systems for diabetics, could grow. The Centers for Disease Control and Prevention (CDC) estimates 34.2 million Americans, just over one in 10 had diabetes in 2020.

Additionally, 88 million Americans or one in three had pre-diabetes in 2020. People with pre-diabetes are more apt to develop diabetes.

Meditronic’s High Margin of Safety

Thus, Meditronic has a growing market for its products. Additionally, Meditronic (NYSE: MDT) has a customer base whose bills insurance and the government pays.

The US Census Bureau estimates 91.5% of Americans had some health insurance in 2018. I think health insurance, gives Meditronic a high margin of safety that could help it survive an economic downturn.

To explain, Meditronic manufactures products people need to use that government and health insurance companies pay for. Remember, government can always increase taxes or borrow money to pay for medical treatments for citizens.

I think investors need to examine Meditronic because it is a safe stock in healthcare that pays a dividend. I think Meditronic shows there are outstanding stocks in the healthcare sector.

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