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Medtronic (NYSE:MDT) delivered yet another satisfactory quarterly result. The company's overall performance has allowed it to meet the Street EPS estimation and modestly top revenue expectations. The company has maintained its pattern of revenue generation in Q2, both on a year-over-year basis, and over the first quarter. As far as the stock movement is concerned, there is little room for further appreciation based on the current profit earning ratio.

The company earned a profit of $646 million or EPS of 63 cents for the second quarter, down from $871 million or EPS of 82 cents last year. On an adjusted basis, net earnings rose to $902 million or EPS of 88 cents. Street analysts predicted the company to earn 88 cents a share and revenue of $4.05 billion.

The company's overall revenue rose 1.79% to $4.10 billion. Of this, revenue from the U.S. increased 2.3% to $2.29 billion, whereas the international division's revenue grew 1.1% to $1.81 billion. The worldwide division's growth would have been higher, but for the unfavorable currency impact.

Category

Q2 FY12

Q1FY13

Q2FY13

Total Revenue in $ Million

4023

4008

4095

Revenue from U.S. in $ Million

2237

2227

2289

Revenue from International $ in Million

1786

1781

1806

U.S. revenue contribution to total revenue

55.6%

55.56%

55.9%

International revenue contribution to total revenue

44.39%

44.44%

44.1%

Revenue from Cardiac & Vascular Group in $ Million

2098

2115

2137

Revenue from Restorative Therapies Group in $ million

1925

1893

1958

Cardiac & Vascular group revenue contribution to total revenue

52.15%

52.77%

52.19%

Restorative Therapies Group revenue contribution to total revenue

47.85%

47.23%

47.81%

Source: Medtronic

The above table indicates the pattern of revenue regeneration Medtronic has witnessed in Q2. There was not much of a significant difference in terms of percentage of revenue contribution to the overall performance.

The company's revenue from the U.S. cardiac rhythm disease management or CRDM, slipped 3.3% year-over-year in the second quarter, but improved 3.5% from Q1. The worldwide division also witnessed a more or less similar pattern in Q2. The emerging market's revenue witnessed 14% upside to $464 million in the latest quarter. On a constant currency basis, the growth would have been 18%.

Moving ahead, Medtronic maintained its EPS forecast of $3.62 - $3.70 for fiscal 2013 and expects revenue to growth 3% - 4% on a constant currency basis. Wall Street analysts are predicting the company to earn EPS of $3.66 and revenue growth of 1.6%.

The company's stock is trading above the 200-day as well as 50-day moving averages of $40.01 and $42.40 respectively. Medtronic's stock is trading between $33.62 and $44.79 in the 52-week period.

The closing price of $42.66 on Tuesday indicates a profit earning ratio of about 12% based on the trailing twelve-month period EPS of $3.56. Medtronic's top end EPS forecast for fiscal 2013 is $3.70. This suggests a P/E of 11.5 at current rate, whereas at the lower end of EPS outlook, P/E is 11.8. The consensus EPS estimate is $3.66. Taking this as a cue, the current P/E of 12 and the street EPS projection indicate that the stock could at best reach $44.00. Therefore, there is little room for further appreciation of the stock. The ideal position is to remain neutral.

Source: Medtronic Earnings Review: Little Room For Further Appreciation