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Stock Strategist

No Surprises in Medtronic's Fiscal Third Quarter

The firm is on track to meet our full-year estimates, and our $60 per share fair value estimate and wide moat rating are intact.

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 Medtronic's (MDT) wide moat is rooted in its dominant presence in highly engineered medical devices that treat chronic diseases, including those outside its historical stronghold in heart disease. Medtronic's moat comes from several sources. First, in the cardiac area, Medtronic benefits from efficient scale, with roughly three competitors in total across its heart-related portfolio. The markets for pacemakers, ICDs, coronary stents, and neuromodulation generally operate as rational oligopolies.

Second, in the spine area, Medtronic's moat is strengthened by high switching costs for surgeons. This dynamic tends to keep spinal surgeons loyal to Medtronic's products, as long as the company does not fall too far behind its competitors when it comes to introducing new technology.

Debbie Wang has a position in the following securities mentioned above: GE. Find out about Morningstar’s editorial policies.