Morgan Stanley Provides Color on Medtronic, Equal-Weight

Morgan Stanley provided color on Medtronic MDT after the company announced its quarterly report. In a research report published today, Morgan Stanley expressed its belief that the earnings per share guidance of $3.43 - $3.50 might be conservative. In the report, Morgan Stanley states, "Adjusting for the impact of Ardian dilution of $0.04-0.06; a restructuring benefit of $0.15-$0.18; share buyback of $0.07; the FY11 tax benefit of $0.10; and the tough comp from the BSX ship hold of $0.04 yields operating EPS growth of 1-3%, effectively in-line with sales. While we were encouraged by in-line GMs in the quarter and reports of a better pricing outlook in certain segments of the business, pricing pressure is clearly challenging. Further, leverage and years of restructuring may leave little low hanging fruit, though MDT sees further opportunities to pull costs out of the business. We expect cost shifting to emerging markets and R&D efficiency to be key tasks for the incoming CEO." On Tuesday, Medtronic lost 0.92% to close the day at $40.88. Its shares fared no better in today's pre-market trading, falling 0.59% to $40.64.