01—Abstract
Summary
Summary of the 8-K filed May 23, 2024. Cited figures are marked; the original filing is the authoritative source.
Medtronic plc reported fourth-quarter and full-year fiscal 2024 results (FY24 ended April 26, 2024), with broad-based organic growth across all four segments.
FY24 revenue was $32.4 billiona, up 3.6% as reported and 5.2% organic. Q4 revenue was $8.6 billion, up 0.5% as reported and 5.4% organic, though reported growth was held back by a $265 million one-time IP agreement in the prior-year quarter and by business exits. Cardiovascular grew 5.0% organically for the year, Neuroscience 5.2%, Medical Surgical 4.7%, and Diabetes 8.6%, with Diabetes showing the strongest momentum.
Profitability on a GAAP basis weakened sharply in Q4, with GAAP diluted EPS of $0.49b versus $0.88 a year earlier, driven largely by a $439 million charge tied to the decision to exit the ventilator product line and other acquisition-related items. Non-GAAP diluted EPS was $1.46 in Q4, down 7%, and $5.20 for the year, down 2% as reported but up 5% on a constant-currency basis, with a $0.33 currency headwind. Cash generation was strong: FY24 operating cash flow rose 12% to $6.8 billion and free cash flow rose 14% to $5.2 billion, helped by working-capital improvements.
Management guided FY25 organic revenue growth to 4% to 5%, reported revenue growth to 2.4% to 3.7%, and non-GAAP diluted EPS to $5.40 to $5.50c, which includes an estimated 5% currency headwind. The board also raised the quarterly dividend to $0.70 per share, marking the 47th consecutive annual increase.
02—Key points
Key Highlights
- FY24 revenue of $32.4B grew 3.6% as reported and 5.2% organically; Q4 revenue of $8.6B grew 5.4% organically, with mid-single-digit or higher organic growth in all four segments.
- Diabetes was the fastest-growing division, with FY24 organic growth of 8.6% and Q4 organic growth of 11.1%, driven by the MiniMed 780G system and U.S. insulin pump sales.
- Q4 GAAP diluted EPS fell to $0.49 (down 44%) due to a $439M ventilator product line exit charge and other items, while non-GAAP diluted EPS was $1.46 (down 7%).
- FY24 free cash flow rose 14% to $5.2B (75% conversion from non-GAAP net earnings), and Medtronic returned $5.5B to shareholders, including $1.6B in Q4 net share repurchases.
- FY25 guidance calls for 4% to 5% organic revenue growth and non-GAAP diluted EPS of $5.40 to $5.50, implying 4% to 6% EPS growth after an estimated 5% currency headwind.
- The quarterly dividend increased to $0.70 per share ($2.80 annualized), the 47th consecutive year of increases, and the company reaffirmed a commitment to return at least 50% of free cash flow to shareholders.
- Product pipeline catalysts include FDA approval of the Evolut FX+ TAVR system and Inceptiv closed-loop spinal cord stimulator, with the Affera Sphere-9 ablation catheter and Simplera Sync CGM submitted for FDA approval.
03—Questions
Frequently Asked Questions
Why did GAAP earnings fall so much in Q4 FY24 when organic revenue grew?
GAAP diluted EPS dropped to $0.49 from $0.88 mainly because of non-GAAP adjustments, most notably $439 million of charges tied to the February 2024 decision to exit the ventilator product line, which included long-lived intangible asset impairments and inventory write-downs. Amortization of intangibles, restructuring costs, and a minority investment loss also weighed on GAAP results. Management's non-GAAP EPS of $1.46 excludes these items, but investors should weigh GAAP results as well.
What is driving the difference between reported and organic revenue growth?
Reported growth lagged organic growth for two main reasons. First, the prior-year Q4 included a $265 million one-time intellectual property payment from Edwards Lifesciences, which inflated the comparison base. Second, business separations and product line exits (such as the ventilator line and the Renal Care Solutions business) and unfavorable foreign currency translation reduced reported revenue. Organic growth excludes these effects, giving a clearer view of underlying demand.
How much of the FY25 EPS guidance is affected by currency, and what does it imply?
The non-GAAP diluted EPS guidance of $5.40 to $5.50 includes an estimated 5% unfavorable currency impact based on recent exchange rates. This implies FY25 non-GAAP EPS growth of 4% to 6% from FY24's $5.20. Reported revenue growth is guided to 2.4% to 3.7%, below the 4% to 5% organic range, reflecting currency and the exclusion of Other revenue from divested or exited businesses. Actual results will depend on exchange rate movements.
Is the dividend sustainable, and how does Medtronic plan to return capital?
The board raised the quarterly dividend to $0.70 per share, or $2.80 annually, extending a streak of 47 consecutive annual increases. FY24 dividends paid totaled $3.7 billion in cash, and free cash flow was $5.2 billion, so the dividend is covered by free cash flow. Management says it will return at least 50% of free cash flow to shareholders, primarily through dividends and to a lesser extent through share repurchases. The dividend is payable July 12, 2024, to holders of record as of June 28, 2024.
Which business segments and products are the key growth drivers for investors to watch?
Diabetes led growth, with the MiniMed 780G system and insulin pumps driving results, and the Simplera Sync CGM awaiting FDA approval. In Cardiovascular, Structural Heart & Aortic grew 8.0% organically for the year on Evolut TAVR adoption, and Cardiac Pacing (Micra) grew in the low-20s in Q4 while pulsed field ablation strengthened. Neuroscience growth was led by Cranial & Spinal Technologies, and Medical Surgical growth was supported by Surgical & Endoscopy. Investors should watch the FDA decisions on the Affera Sphere-9 catheter and Simplera Sync CGM, along with the full launch of Evolut FX+ in summer 2024.
04—Continue