Medtronic Options Surge Higher

Medtronic, Inc. (MDT) shares moved higher Thursday after reporting earnings earlier this week and approving a cash dividend. Options on the stock also surged higher with some 13,071 contracts changing hands, which is more than five times the average daily volume of 2,469 contracts. Short-term traders picked up the September $55 and $57 calls, which is reflects a positive sentiment on the stock over the next 29 days. Many long-term traders also picked up the January ‘09 $50 in-the-money LEAPS, which saw some 2,035 contracts trade hands.

Last quarter, Medtronic saw its revenues rise 19% year-over-year thanks in large part to a lower dollar that helped spur growth overseas. New product sales also accounted for a substantial increase in revenues with the company’s spinal business rising 33% thanks to its recent acquisition of Kyphon. However, organic growth of its spinal business grew only 8% this year, which is rather weak by a historical prospective. Sales of its new drug-eluting stent Endeavor also grew to claim 19% of the U.S. market.

Investors have been most impressed with Medtronic’s new status as a cash cow. The company has increased its dividends nearly 50% while using additional cash to buy back shares. The 1.4% dividend may not seem like a lot on the surface, but it is certainly a good amount given the spectacular top-line growth. Moreover, investors can expect further improvements from a $1 billion planned reduction in cost of goods sold by 2012, which will improve its bottom-line.

Medtronic, Inc. is a global player in medical technology, alleviating pain, restoring health, and extending life for millions of people around the world. The Company operates in seven business segments: Cardiac Rhythm Disease Management (CRDM); Spinal; CardioVascular; Neuromodulation; Diabetes; Surgical Technologies, and Physio-Control. In October 2007, the Company launched the CD HORIZON LEGACY Anterior Spinal System. In July 2008, Medtronic completed the acquisition of Restore Medical, Inc.

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