Medtronic (MDT) issued strong fiscal fourth-quarter results Tuesday that showed solid earnings expansion and share gains in the U.S. drug-eluting stent market. We think the firm's newly issued outlook for fiscal 2013 is easily achievable, and our fair value estimate remains unchanged.
The heart-rhythm device maker's revenue advanced 4% on a constant currency basis vs. the same period a year ago. On a non-GAAP basis, fourth-quarter net earnings and diluted earnings per share came in at $1.036 billion and $0.99, up 7% and 10%, respectively, from last year's quarter. Consensus expectations were at $0.98 per share. Medtronic pulled in nearly $4 billion in free cash flow during fiscal year 2012. The medical-device maker noted that strength in the quarter was broad-based and pointed to strong U.S. launches of its Resolute Integrity drug-eluting stent and RestoreSensor spinal cord stimulator. Both its Cardiac/Vascular Group and Restorative Therapies Group experienced revenue growth of 4% on a constant currency basis. We were particularly pleased with the performance of the launch of the Resolute Integrity drug-eluting stent, which has doubled Medtronic's drug-eluting stent market share in the U.S.
Looking ahead, Medtronic expects fiscal 2013 revenue to be as much as 4% higher than the most recently reported period and diluted earnings per share to approach $3.70, reflecting bottom-line growth of about 7%. Consensus expectations were at $3.66 per share. We continue to hold the firm in the portfolio of our Dividend Growth Newsletter, as management remains committed to returning cash to shareholders. Medtronic sports a Valuentum Dividend Cushion ratio of 2.8, revealing significant potential for future dividend growth. Our Dividend Cushion recently predicted the dividend suspension at J.C. Penney (JCP), which had posted a score below 1, indicating an inability of the firm to cover dividend payments with future free cash flow given its existing capital structure.