Medtronic stock skidded Wednesday after the medtech company beat fiscal fourth-quarter forecasts, but announced plans to spin off its diabetes business.
The Ireland-based medtech company sells continuous glucose monitors, or CGMs. These body-worn devices track blood sugar in real time. Medtronic also sells insulin pumps, which can be paired with CGMs for nearly automated treatment for patients with diabetes requiring insulin therapy.
During the three months ended April 25, the diabetes business generated $728 million in sales, up 10.4% on a strict, as-reported basis and up 12% organically. The business brought in nearly $2.75 billion in sales during the last fiscal year.
Dexcom and Abbott Laboratories are well-known for their G7 and FreeStyle Libre CGMs, while Tandem Diabetes and Insulet sell insulin pumps. Their devices are often compatible, and the companies team up to offer combination approaches.
But, after the spinoff, the new company will be the only one with both devices.
"It will create an independent, scaled leader in Diabetes, focused on accelerating innovation and differentiated as the only company to commercialize a complete ecosystem to address intensive insulin management," Medtronic said in a news release.
Medtronic stock dipped 2.3%, closing at 84.40. Shares are consolidating with a buy point at 96.25, according to MarketSurge. But Medtronic stock closed Wednesday below its 50-day and 200-day lines.
Highlighted Focus On Diabetes Devices
Sales of Medtronic's diabetes devices easily beat analysts expectations in the fiscal fourth quarter and fiscal 2025.
The rates of diabetes diagnoses are on the rise. According to the Centers for Disease Control and Prevention, about one in 10 Americans have diabetes and 90% to 95% of them have type 2 diabetes. Unlike type 1 diabetes, which is genetic, type 2 diabetes can be modified with lifestyle changes.
So, interest in companies with diabetes-managing devices has increased in recent years. In fact, there's a market for people without diabetes to use the same devices. Abbott sells its Lingo device for nondiabetics to track their glucose. Dexcom's Stelo is approved for adults who don't require insulin. Both are available over-the-counter and online, so patients don't need a prescription.
Medtronic expects to finish the separation of its diabetes business within 18 months. The company is angling for an initial public offering and a subsequent split-off.
Medtronic Mostly Beats Expectations
Across all products, Medtronic reported $8.93 billion in fiscal fourth-quarter sales, beating forecasts for $8.81 billion, according to FactSet. Sales grew 3.9% on a strict, as-reported basis, and 5.4% organically.
Medtronic also earned an adjusted $1.62 per share, up 11% and ahead of expectations for $1.58.
Diabetes, cardiovascular and medical-surgical sales all topped forecasts, but neuroscience sales missed, Evercore ISI analyst Vijay Kumar said in a report.
He said Sean Salmon, president of the cardiovascular business, will be leaving Medtronic. Skip Kiil, president of the cranial and spinal technologies business, will succeed Salmon. Michael Carter, general manager of the spine business, will follow in Kiil's footsteps.
For fiscal 2026, Medtronic guided to adjusted earnings of $5.50 to $5.60 per share, above calls for $5.46 a share, according to FactSet. But the guidance missed other estimates by 5%, Kumar said. The lower end of the outlook assumes U.S./China tariffs resume at the higher rates after the 90-day pause. The higher side assumes the current tariffs stay in place for the rest of the year.
Medtronic also guided to 5% organic sales growth this year.
Kumar reiterated his outperform rating and 105 price target on Medtronic stock.
Follow Allison Gatlin on X/Twitter at @AGatlin_IBD.
