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Reuters Company Research

Medtronic, Inc. (MDT) 28 Jul 2010


Performance Rating: Neutral

2000 2010

Share Price Summary Overview Percent Price Change MDT S&P 500
Close Price on 7/28/10......................................... $36.45 Float (mil)........................................................ 1,081.172 Year to Date...............................-17.12........... -0.80
Absolute Price Change on 7/28/10........................... -0.91 10 Day Average Volume (mil)................................... 5.680 One Year.......................................4.20.......... 13.43
Percent Change....................................................-2.51% 1 Day Volume Change on 7/28/10.........................-2.26% Two Years................................. -30.77......... -12.43
Off 52-Week High...............................................-21.88% Market Capitalization (mil)....................................$39,474 Three Years............................... -28.26......... -24.18
Over 52-Week Low................................................ 5.90% TTM Price/Earnings................................................. 13.05 Five Years..................................-32.42......... -10.38
Beta....................................................................... 0.768 Price/Earnings Current Fiscal Year Estimate.............. 10.43 Ten Years.................................. -29.90......... -22.10

Table of Contents
Reuters Rating ....................................... 2 General Sentiment ..................................5 Footprints of Success ............................. 8
Getting Acquainted ................................. 3 Stock Price Rationale ..............................6
Share Price Trends .................................4 Expectations and Credibility .....................7

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Medtronic, Inc. (NYSE:MDT) -- Medical Equipment & Supplies/Healthcare Reuters Company Research

Performance Rating: Neutral


Reuters ratings are based on a proprietary model that leverages widely accepted statistical methods and financial concepts to select attributes shown to be strong indicators of future
stock price performance and applies these to rank stocks along a normal distribution curve. Ranks for Fundamental Quality, Value Catch-up, Operational Trends and Technical Factors
are combined into a Composite Rating of Outperform, Neutral or Underperform.

Reuters Composite Rating Component Rating Component Weight


We cannot guarantee that each stock will perform Types of investment criteria differ in how useful
in accordance with its rank. But we do believe that they are for predicting future stock movement.
over the long term, stocks rated Outperform (30% Based on our research, the Composite Rank
of all stocks we rate) will, in the aggregate, Fundamental Technical assumes these relative degrees of importance.
outperform stocks rated Neutral (40% of all stocks Quality Factors

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Technical Factors 27%
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MDT shares are presently rated NEUTRAL. Value Catch-up 24%
No forecast is made for the stock market as a whole. But Value Operational
we believe it is probable that stocks rated NEUTRAL will, Catch-up Trends
in the aggregate, perform generally in line with our
coverage universe. "Under" = Underperform Technical Factors: Neutral
This rating is based on analyses of share price
Fundamental Quality Component: Outperform movements over a variety of time periods. We
compare performance characteristics of individual
This rating is based on characteristics traditionally associated with "good" companies. We focus on how each company stocks with those of all the others we rate.
measures up against others, and give careful attention to recent improvement or slippage relative to other companies. Generally speaking, our goal is to favor up-trending
TTM = Trailing Twelve Months. shares that have experienced recent corrections
Very Negative Negative Neutral Positive Very Positive and de-emphasize down-trending shares
TTM Return on Investment experiencing uncharacteristic periods of strength.
Improvement in TTM Return on Investment Here is how MDT shares performed during the
TTM Pretax Margin various periods we examined.
Improvement in TTM Pretax Margin Price Change
Depreciation in Excess of Capital Spending Needs Past 7 days -0.9%
Issuance/Repurchase of Common Shares Past 30 days 0.7%
Common Shares Dilution Past 60 days -7.0%
Presence/Absence of Unusual Income Items
Change for Past 180 Days: -15.0%
Value Catch-up Component: Underperform
This rating measures the extent to which the share price adequately reflects improving or eroding fundamentals, and favors
shares whose prices have been slower to "catch up" to improving performance measures. TTM = Trailing Twelve Months. $42.89
Very Negative Negative Neutral Positive Very Positive $36.45
Price Catch-up with TTM Earnings Open on 2/1/10 Close on 7/28/10
Price Catch-up to TTM Sales
Price Catch-up to TTM Free Cash Flow
Price Catch-up to MRQ Book Value Change Between 60 and 30 Days Ago: -7.6%

Operational Trends Component: Neutral


This rating reflects how strong a company's recent Sales and EPS (reported as per GAAP) growth have been relative to other $39.18
companies we rate. MRQ = Most Recent Quarter. TTM = Trailing Twelve Months. $36.21

Very Negative Negative Neutral Positive Very Positive Open on 6/1/10 Close on 6/29/10
Most Recent Quarter EPS Growth
Improvement in EPS Growth for Consecutive Quarters Change Between 180 and 60 Days Ago: -8.7%
Improvement in EPS Growth (MRQ vs. TTM)
Most Recent Quarter Sales Growth
Improvement in Sales Growth (MRQ vs. TTM)
$42.89 $39.18

Peer Comparison
Open on 2/1/10 Close on 5/28/10
This section shows the comparison of key components between MDT and several of its peers.
Composite Fundamental Technical Value Operational
Company Name (Ticker) Rating Quality Factors Catch-up Trends Change Between 180 and 90 Days Ago: 1.9%
Medtronic, Inc. (MDT) Neutral Outperform Neutral Underperform Neutral
Boston Scientific Corpo... (BSX) Underperform Neutral Neutral Outperform Underperform
St. Jude Medical, Inc. (STJ) Neutral Outperform Underperform Underperform Outperform $43.69
$42.89
Zimmer Holdings, Inc. (ZMH) Outperform Outperform Neutral Underperform Outperform
Johnson & Johnson (JNJ) Neutral Outperform Neutral Underperform Underperform
Stryker Corporation (SYK) Neutral Outperform Neutral Underperform Neutral Open on 2/1/10 Close on 4/30/10

July 28, 2010 Page 2


Medtronic, Inc. (NYSE:MDT) -- Medical Equipment & Supplies/Healthcare Reuters Company Research

Getting Acquainted
Start your analysis by learning what the company does, how well it does it, where it stands relative to peers, and whether aspects of the corporate structure or capitalization are
bothersome to you.

Business Summary Contact Info


Medtronic, Inc. (Medtronic) is a medical technology company. The Company is engaged in research, design, Medtronic, Inc. is headquartered at:
manufacture and sale of products to alleviate pain, restore health and extend life. It manufactures and sells 710 Medtronic Parkway, LC-480, Minneapolis,
device-based medical therapies. It operates in seven segments: Cardiac Rhythm Disease Management, Spinal, MN, 55432
CardioVascular, Neuromodulation, Diabetes, Surgical Technologies and Physio-Control. Its primary customers include United States
hospitals, clinics, third party healthcare providers, distributors and other institutions, including governmental (763) 505-2692
healthcare programs and group purchasing organizations. In April 2010, the Company completed the acquisition of www.medtronic.com/
Invatec, S.p.A., a developer of medical technologies for the interventional treatment of cardiovascular disease. lJeff Warren, Vice President, Investor Relations

Financial Trends
TTM = Trailing Twelve Months, * = Most Recent Quarter.
Historic Growth Rates
Fiscal Year Ending 4/28/06 4/27/07 4/25/08 4/24/09 4/30/10 TTM 3 Year 5 Year 10 Year
Sales (mil) $11,292.0 $12,299.0 $13,515.0 $14,599.0 $15,817.0 $15,817.0 8.75 9.48 12.17
EPS (GAAP) $2.09 $2.41 $1.87 $1.84 $2.79 $2.79 5.02 13.58 12.17
Dividends/Share $0.39 $0.44 $0.50 $0.75 $0.82 $0.82 23.06 19.61 17.75
Book Value/Share $8.12 $9.60 $10.25 $11.78 $13.33 * $13.33 11.57 9.08 13.48
Tangible Book Value/Sh. $2.98 $4.56 $1.62 $2.24 $3.35 * $3.35 (9.76) (4.66) 2.46
Cash Flow/Share $2.54 $2.91 $2.43 $2.46 $3.49 $3.49 6.19 13.45 12.38
Free Cash Flow/Share $0.42 $1.53 $2.03 $2.11 $2.33 $2.33 15.04 7.80 19.17

Key Ratios
Historic Averages
Fiscal Year Ending 4/28/06 4/27/07 4/25/08 4/24/09 4/30/10 TTM 3 Year 5 Year 10 Year
% Sales Growth 12.3 8.9 9.9 8.0 8.3 8.3 8.8 9.5 12.2
% EPS Growth 41.6 15.3 (22.5) (1.7) 52.0 52.4 9.3 16.9 15.2
% Gross Margin 75.1 74.3 74.5 75.9 75.9 75.9 75.4 75.1 75.1
% Operating Margin 28.0 28.6 20.3 16.7 25.1 25.1 20.7 23.7 25.7
% Tax Rate 19.4 20.3 22.0 15.2 21.9 21.9 19.7 19.8 25.7
% Return on Assets 14.0 14.3 10.3 9.0 12.0 12.0 10.4 11.9 12.7
% Return on Investment 17.9 17.4 12.0 10.6 14.3 14.3 12.3 14.4 16.1
% Return on Equity 25.7 27.5 19.0 16.7 22.3 22.3 19.3 22.2 21.2
Asset Turnover 0.6 0.6 0.6 0.6 0.6 0.6 0.6 0.6 0.7
Receivables Turnover 4.8 4.8 4.4 4.5 4.9 4.9 4.6 4.7 4.7
Inventory Turnover 2.6 2.6 2.8 2.6 2.6 2.6 2.7 2.6 2.5

Equity Information Analyst Footnotes


Whether you are willing to accept companies that have or don't have major shareholders with controlling ownership blocks, Look for accounting changes, restructurings,
multiple classes of common, or convertible debt or preferred issues is a matter of individual preference. Look here for etc.which may affect how useful historic data is
anything along these lines that might make you more or less inclined to invest in this company. inassessing future company prospects.
Common Stock $.10 Par, 6/10, 1.6B auth., 1,082,967,846 issd. Insiders own 0.17%. PO 12/74, 700K shs. @ $22 by Smith Barney. PO FY'97-'98 and FY'98 Q's are restated for poolings with
9/98, 12.5M shares @ $56.75 by Goldman Sachs. *9/99, 9/97, 9/95, 9/94, 8/91, 9/89 2-for-1 splits. *FY'99-'00 and FY'01 Q's are Physio-Control, Arterial Vascular, and Sofamor Danek.
restated for the pooling with PercuSurge (3.7M shares issd.).

Peer Comparison
This table gives an indication of how Medtronic, Inc. stands in key respects compared with companies in the Medical Equipment & Supplies Industry
Current Fiscal Current Fiscal P/E Based on
Last Fiscal Year Year Projected Projected Year Projected Current Year EPS % Growth EPS % Growth
Company Name (Ticker) Revenue (mil) Revenue (mil) Price/Sales Operating EPS EPS Estimates Previous 5 Years Next 5 Years
Medtronic, Inc. (MDT) $15,817.0 $16,366.2 2.4 $2.79 $3.49 10.4 13.6 10.7
Boston Scientific Corpo... (BSX) $8,188.0 $7,807.1 1.1 ($0.68) $0.32 17.5 NA 10.3
St. Jude Medical, Inc. (STJ) $4,681.3 $5,112.8 2.3 $2.26 $2.87 12.7 15.4 12.2
Zimmer Holdings, Inc. (ZMH) $4,095.4 $4,256.3 2.5 $3.32 $4.27 12.5 8.7 10.5
Johnson & Johnson (JNJ) $61,897.0 $62,562.4 2.5 $4.40 $4.72 12.3 9.9 6.8
Stryker Corporation (SYK) $6,723.1 $7,231.1 2.6 $2.77 $3.27 14.3 21.0 13.1
Synthes Inc. (SYST) NA NA NA NA NA NA NA NA
Abbott Laboratories (ABT) $30,764.7 $35,424.8 2.1 $3.69 $4.16 11.8 12.8 10.5

July 28, 2010 Page 3


Medtronic, Inc. (NYSE:MDT) -- Medical Equipment & Supplies/Healthcare Reuters Company Research

Share Price Trends


Stock price trends depict the collective opinion of the investment community. You don't have to agree with consensus views but seeing how others feel can help you decide what to
look for as you go further in your analysis. Consider it similar to reading a review before seeing a movie.

1 Year Price Chart with Bollinger Bands and Relative Strength


Technical analysts believe a narrowing of the bands suggests a significant price movement, up or down, will soon occur. Also, many say stocks that move outside the bands and then
back inside will soon move toward the opposite band. The Relative Strength Index (RSI) calculates the strength of the current price movement compared to other recent moves and
may signal when a trend is unsustainable. Technical analysts also believe RSI peaks/valleys forecast changes in share price trends.

High: 46.66
$46.66

43.06

39.46

35.86

Low: 34.82

Relative Strength Indicator 100%


50%

Volume (mil)
Average Volume
6.25

Aug' 09 Sep Oct Nov Dec Jan' 10 Feb Mar Apr May Jun Jul

10 Year Price Chart (Monthly) 5 Year Price Chart (Monthly)

$62.00 $59.00

52.00
49.00

42.00
39.00

32.00
29.00

0.11 0.14

2001 2002 2003 2004 2005 2006 2007 2008 2009 Vol (bil) 2006 2007 2008 2009 2010 Vol (bil)

6 Month Price Chart (Daily) 1 Month Price Chart (Daily)

$46.00
$38.00

37.30
41.00
36.60

35.90
36.00
35.20

6.31 6.22

Feb' 10 Mar Apr May Jun Jul Vol (mil) Jul Vol (mil)

July 28, 2010 Page 4


Medtronic, Inc. (NYSE:MDT) -- Medical Equipment & Supplies/Healthcare Reuters Company Research

General Sentiment
You can follow popular opinion or choose a contrarian's strategy. Either way, you should know whether the Street is bullish or bearish. Investor sentiment is typically positive when
the 50-day moving average is rising, especially if it's also above the 200-day moving average. Additionally, changes in price trend can be deemed more definitive if supported by
higher than normal volume.

52 Week Price History

$46.66

50 Day Moving Average

42.86

39.06

35.26

200 Day Moving Average

Volume (mil)
Average Volume
6.25

Aug' 09 Sep Oct Nov Dec Jan' 10 Feb Mar Apr May Jun Jul

Price History
Calendar Year 2001 2002 2003 2004 2005 2006 2007 2008 2009
High Price 60.81 50.69 52.92 53.70 58.91 59.87 57.99 56.97 44.94
Low Price 36.64 32.50 42.15 43.99 48.70 42.37 44.87 28.33 24.06
Year End Price 51.21 45.60 48.61 49.67 57.57 53.51 50.27 31.42 43.98

High P/E NM NM 48.21 34.03 84.36 25.77 24.63 184.62 97.64


Low P/E 36.66 29.52 27.28 25.13 20.37 18.66 17.61 12.54 9.62
Year End P/E 58.90 56.15 36.99 30.77 38.58 25.31 20.63 16.65 23.84
Dividend Yield 0.39 0.50 0.51 0.58 0.58 0.72 0.88 1.59 1.71

Price Performance Insider Trading


When stocks significantly beat or trail the S&P 500 or the industry, investors are looking more intently at company- specific Insider buying can be seen as bullish because,
matters than general-market factors. In the two percentile rank columns, a high "Rank in Industry" coupled with a low presumably, their company knowledge is superior.
"Industry Rank" could signify a hot stock in a cold industry. The reverse, is also noteworthy. However, insider sales are less reliable because
insiders may sell for a variety of reasons that have
Actual Percent vs. vs. Rank in Industry
nothing to do with their opinion of the stock.
Time Period Change Change S&P 500 Industry Industry Rank
4 Week 0.18 0.5% (6.4)% (0.9)% 67 4
In the last 6 months, there have been 2 insider
13 Week (6.89) (15.9)% (9.4)% (7.8)% 45 29 purchases for a total of 33,000 shares, and there have
26 Week (7.14) (16.4)% (17.0)% (12.0)% 36 8 been 2 insider sales for a total of 11,000 shares.
52 Week 1.63 4.7% (7.3)% (7.2)% 54 23
Net Change (6 months) 0 mil
Year To Date (7.53) (17.1)% (16.5)% (14.1)% 38 16 6 Month Net Transactions 0

BarChartKey Rank Key Institutional Ownership


YTD R 4 Wk. Worst R Best 1 R 100 It's worthwhile to know what institutions are doing
simply because their stock positions can be so
Short Interest large. In the short term, stocks will perform well if
institutions are buying and perform poorly if
A high or increasing short interest implies that many investors expect the stock price to decline. You can treat that as a institutions are selling.
warning. Or you can disagree with the crowd and buy stocks with high short interest in anticipation of a short squeeze (a rally
that occurs when short sellers rush to buy a stock, fearing losses they might incur if they wait too long). Prospects for a 2,004 institutions own 78.0% of the 1.08 billion
squeeze are indicated by high readings in the "Days to Cover" column (which tells how many days it would take for all short common shares outstanding. This is higher than the
interest positions to be covered if recent trading volume levels persist). The risk: The bears may be right. So research other average institutional ownership of the Medical Equipment
aspects of the company. & Supplies Industry at 40.2%, and higher than the
Month Shares % Outstanding Percent of Float Days to Cover average of the S&P 500 as a whole which is 66.7%.
June 2010 12,217,780 1.13 1.13 1.98 Net Change (3 month) (0.3)%
May 11,555,920 1.05 1.05 1.68 Net Purchases (3 month) (2.59) mil
April 9,812,760 0.89 0.89 1.36 Shares Purchased (3 month) 44.36 mil
March 11,740,800 1.07 1.07 2.48 Shares Sold (3 month) 46.94 mil

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Medtronic, Inc. (NYSE:MDT) -- Medical Equipment & Supplies/Healthcare Reuters Company Research

Stock Price Rationale


Determine if the stock price is justified by: growth-based value, comparative value, liquid assets, or dividends. The better the company, (in terms of growth or quality), the higher the
valuation measures can be. And if valuation ratios are extremely low, double-check to see if the company appears excessively weak. In any case, you don't have to say yes to any
valuation measure - many buy shares based on other factors (e.g., growth). But if you do that, at least understand what you're doing and consider the risks.

Viewing Things In Context


Many people erroneously work with valuation ratios calculated based on numbers that aren't truly representative of a company's underlying sustainable financial characteristics. Thus
it's important to determine if today's sales and EPS are significantly depressed or elevated due to temporary factors such as business cycles. Higher ratios can be tolerated if sales and
EPS are temporarily depressed. But if the company is experiencing unsustainable boom conditions, seek lower ratios. GAAP = Generally Accepted Accounting Principles.

Fiscal Year Ending 4/30/04 4/29/05 4/28/06 4/27/07 4/25/08 4/24/09 4/30/10 4/30/11E 4/30/12E
Sales/Share $7.41 $8.24 $9.28 $10.59 $11.82 $12.96 $14.26 $14.75 $15.47
Price/Sales NA NA 5.40 5.06 4.18 2.28 3.06 2.47 2.36
EPS (GAAP) $1.60 $1.48 $2.09 $2.41 $1.87 $1.84 $2.79 $3.49 $3.82
P/E (GAAP) NA NA 23.96 22.22 26.44 16.09 15.64 10.43 9.54
EPS (Normalized) $1.63 $1.86 $2.46 $2.53 $2.54 $3.10 $3.14 $3.49 $3.82
P/E (Normalized) NA NA 20.40 21.18 19.43 9.55 13.91 10.43 9.54
Dividend Yield (%) NA NA 0.77 0.82 1.01 2.54 1.88 2.44 2.74

Valuation Based On Growth


The faster a company grows, the higher its stock's P/E can be. Contrary to popular belief, PEG (P/E over Growth Rate) need not always be 1.00 or less. But all else being equal, lower is
better (and 3.00 is usually too high). Try to favor company PEGs that are lower than industry and market PEGs. In all cases, watch for very high growth estimates. If overly optimistic
projections get cut, PEG would wind up being higher. FY = Fiscal Year.

Price/EPS (Est.) for Current FY Price/EPS (Est.) for Next FY Long Term Growth Estimate Next FY P/E over LT Growth
Medtronic, Inc. 10.43 9.54 10.68 0.89
Medical Equipment & Supplies 16.66 14.78 14.24 1.05
S&P 500 14.97 12.82 11.04 1.35

Comparative Valuation Ratios Dividends


Valuation below industry or S&P 500 averages can be attractive - unless the company is materially worse in terms of quality Dividend is the most classic basis for
growth prospects. Year-by-year trends in comparative valuations can give clues about company merit. Be especially on guard stockvaluation, and high dividend yields are
if comparative ratios are deteriorating over time. On the other hand, relatively low valuations that are moving toward the usuallydeemed preferable. Today, with many
averages might indicate that the market is tuning in to heretofore under-appreciated company merit. companiesreinvesting profits back into the
FY = Fiscal Year, TTM = Trailing Twelve Months, * = Most Recent Quarter. business, moderateor low yields can be accepted if
Medtronic, Inc. dividends growrapidly. The main risk is that poor
performance willcause the dividend to be cut or
Price/ Price/ Price/ Price/ Price/ Price/Free omitted. A very highpayout ratio is one warning
Earnings Sales Book Cash Flow Tang. Book Cash Flow signal. Another is ayield that is very high relative to
Trailing 12 Months 13.05 2.50 * 2.73 10.20 * 10.73 15.25 industry peers.
FY Ending 4/30/10 15.64 3.06 3.28 12.52 13.03 18.72 TTM = Trailing Twelve Months.
FY Ending 4/24/09 16.09 2.28 2.51 12.03 13.19 14.05
FY Ending 4/25/08 26.44 4.18 4.82 20.37 30.48 24.39
FY Ending 4/27/07 22.22 5.06 5.58 18.40 11.75 34.96 MDT Industry
Current Dividend Yield 2.4% 2.1%
5 Yr. Avg. Dividend Yield 0.6% 0.6%
Bar Chart Key 5 Yr. Dividend Growth Rate 19.6% 20.5%
2007 R TTM TTM Payout Ratio 29.2% 14.0%
5 Yr. Average Payout Ratio 25.9% 11.0%
Medical Equipment & Supplies
Price/ Price/ Price/ Price/ Price/ Price/Free
Earnings Sales Book Cash Flow Tang. Book Cash Flow
Trailing 12 Months 20.14 3.14 * 3.34 14.65 * 6.08 19.42 Liquid Assets
FY Ending 2010 16.53 2.83 3.21 12.68 11.68 19.50
FY Ending 2009 21.38 NA 3.96 NA 10.14 NA Get a general sense of the extent to which the
FY Ending 2008 21.06 3.51 3.92 13.18 14.34 22.62 stockprice is offset by the presence of assets that
FY Ending 2007 28.99 4.83 5.71 25.03 8.41 33.41 can beconverted to cash immediately or in the near
future. Often, these ratios will not be meaningful.
Most companies are valued as ongoing businesses,
rather than liquidation/buyout prospects. If you're
Bar Chart Key lookingat an especially troubled company, be aware
2007 R TTM
that seemingly liquid-asset windfalls can be
dissipatedby continuing operating losses and/or
S&P 500
shutdown costs.
Price/ Price/ Price/ Price/ Price/ Price/Free
Earnings Sales Book Cash Flow Tang. Book Cash Flow
Trailing 12 Months 18.70 2.35 * 3.40 13.01 * 4.98 20.85 Price to ... MDT Industry
FY Ending 2010 NA NA 3.35 NA 4.70 NA General Working Capital 8.5 8.5
FY Ending 2009 20.52 2.36 3.21 12.00 3.66 16.30 (current assets minus current liabilities)
FY Ending 2008 17.10 2.32 3.32 10.59 3.68 22.89
FY Ending 2007 22.95 2.92 4.13 15.10 5.88 26.82 Net Working Capital (11.0) 3.0
(current assets minus all liabilities)

Bar Chart Key Cash (& cash equivalents) 10.6 12.6


2007 R TTM Cash minus total debt (7.0) (2.0)
Cash minus all liabilities (4.1) (0.1)

July 28, 2010 Page 6


Medtronic, Inc. (NYSE:MDT) -- Medical Equipment & Supplies/Healthcare Reuters Company Research

Expectations And Credibility


In theory, stock prices are based on the "present value" of expected future company cash flows. Therefore, we try to obtain accurate estimates of future financial performance. But
remember, these are just estimates. Since we cannot really know what will happen tomorrow, we evaluate estimates critically by seeking clues that help us distinguish between
normal versus excessive degrees of uncertainty.

Estimates In Context
Below are the present consensus revenue and EPS estimates. Notice whether analysts expect recent year-to-year growth trends to persist, or are forecasting sharp improvement or
deterioration. The sharper the predicted change, the greater the level of uncertainty in the forecast. (GAAP = Generally Accepted Accounting Principles)

Revenue ($mil) GAAP Earnings Per Share ($)


Jul 31st Oct 30th Jan 29th Apr 30th Year Total Jul 31st Oct 30th Jan 29th Apr 30th Year Total
FY Ending 4/2008 3,127.0 6,250.0 3,405.0 3,860.0 13,515.0 0.59 1.16 0.07 0.72 1.87
FY Ending 4/2009 3,706.0 7,276.0 3,494.0 3,829.0 14,599.0 0.64 1.12 0.62 0.09 1.84
FY Ending 4/2010 3,933.0 7,770.0 3,851.0 4,196.0 15,817.0 0.40 1.18 0.75 0.86 2.79
FY Ending 4/2011 3,965.9 E 4,008.1 E 4,015.4 E 4,339.2 E 16,366.2 E 0.82 E 0.85 E 0.87 E 0.96 E 3.49 E
FY Ending 4/2012 4,189.1 E 4,240.7 E 4,266.4 E 4,615.3 E 17,167.0 E 0.91 E 0.94 E 0.94 E 1.04 E 3.82 E

Confidence In Estimates EPS Estimate Accuracy


The range of estimates can be measured by standard deviation. The narrower the range (the lower the standard deviation Assess the extent to which analysts are
compared to the "mean" estimate) and/or the greater the number of analysts, the more definitive the expectations. Note, too, accurateand have a handle on the earning trends
the extent to which company expectations are consistent with or diverge from those for industry and/or market. bycomparing Estimates to Actual figures (which
mayomit various charges/credits included in
Long Term Growth Rate Near Term Growth Rate GAAPresults). The Actual figures are the ones that
Mean # of Estimates Standard Dev. Mean # of Estimates Standard Dev. aremost comparable in accounting method to the
Estimates. (GAAP = Generally Accepted Accounting
10.7 12 1.84 MDT 8.2 28 1.04
Principles)
14.2 4 2.66 Industry 5.3 8 4.30
11.0 5 3.75 S&P 500 7.0 14 7.73 Quarter Estimate Actual GAAP
04/10 qtr. $0.88 $0.90 $0.86
Reasonableness 01/10 qtr. $0.76 $0.77 $0.75
10/09 qtr. $0.74 $0.77 $1.18
Look at the tables below to see if analysts are expecting the company to accomplish more than it has accomplished in the 07/09 qtr. $0.78 $0.79 $0.40
past. Such things can and do happen. But the stronger the predicted future (compared to the past), the greater the burden of 04/09 qtr. $0.82 $0.82 $0.09
proof on the part of those issuing the estimates.

Annual Growth EPS (%) Sales (%) Quarterly Growth EPS (%) Sales (%) Quarterly EPS Estimate Revisions
5 year Estimate 10.7 NA 10/10 qtr. Estimate 10.0 4.4
2011 Estimate 25.1 3.5 07/10 qtr. Estimate 3.6 0.8 07/10 qtr.
Last 5 years 13.6 9.5 04/10 qtr. 9.8 9.6
Last 3 years 5.0 8.7 01/10 qtr. 8.5 10.2 $0.52
Last Year 52.0 8.3 10/09 qtr. 14.9 7.5 0.50
Trailing 12 Months 52.4 8.3 07/09 qtr. 9.7 6.1 0.47
0.45
Analyst Recommendation Trends Oct Jan Apr Jul

Difference of opinion is normal, so don't demand unanimity. Look for ratings clusters in a part of the best-to-worst scale and 10/10 qtr.
at Mean Rating scores. Also important is whether analyst sentiment is improving or declining over time. $0.49
0.47
Buy Outperform Hold Underperform Sell Mean
0.44
(Value 1) (Value 2) (Value 3) (Value 4) (Value 5) Rating
As of 7/28/10 8 8 11 0 0 2.11 0.42
As of 4 Weeks ago 9 6 12 0 0 2.11 Oct Jan Apr Jul
As of 8 Weeks ago 10 7 11 0 0 2.04 01/11 qtr.
As of 12 Weeks ago 9 6 12 0 0 2.11
$0.52
0.50
Bar Chart Key Mean Rating 0.47
12 Wks ago R 7/28 1.00 = Best 0.45
5.00 = Worst Oct Jan Apr Jul

Annual EPS Estimate Revisions


Since estimates address an unknowable future, revision (often prompted by company guidance) is to be expected. Investors are usually happy when analysts are scrambling to chase
reality upward. So increases in estimates tend to spark strong share price performance. The reverse is usually true when estimates are falling.
Gap in Coverage Negative Surprise Positive Surprise As Expected EPS
$46.03 $1.94
FY 2005
1.78
42.43

1.63
38.83
FY 2004 1.48

35.23 FY 2003 1.32


Aug' 09 Sep Oct Nov Dec Jan' 10 Feb Mar Apr May Jun Jul

July 28, 2010 Page 7


Medtronic, Inc. (NYSE:MDT) -- Medical Equipment & Supplies/Healthcare Reuters Company Research

Footprints of Success
In many respects, business success requires subjective judgment. However, over time, good companies tend to leave good footprints, which become most visible when company data
is compared to industry/sector/market benchmarks. That's how you see when companies perform well, not just because a rising business tide lifts all boats, but because the company
is doing unique, good things. Look, too, at time-series comparisons, and take note of companies that are improving faster or suffering less than peers.

Growth Rates (%)


Investors are accustomed to looking at EPS growth. Check sales growth, too. EPS gains can't persist indefinitely without good sales growth. Do further investigation if sales trends are
falling short. (A big short fall might reflect a divestiture. On the other hand, if sales growth looks too good, check to see if it's being boosted by an acquisition.) Also, compare sales
growth to capital spending growth. Over a prolonged period, it's reasonable to expect capital spending growth to more or less keep pace with sales growth. If the latter is significantly
higher, capital spending may have to accelerate in the next few years.
Company Rank MDT MDT MDT
% Growth Rate MDT Industry Sector S&P 500 in Industry vs. Industry vs. Sector vs. S&P 500
Sales Growth For Most Recent Quarter 9.6 10.0 25.0 17.5 58
Sales Growth For Trailing 12 Months 8.3 7.7 9.4 3.2 65
Sales Growth For Past 5 Years 9.5 15.3 13.5 9.6 46

Capital Spending Growth for Past 5 Years 6.6 11.3 4.1 6.2 62

EPS Growth for Most Recent Quarter 839.0 13.1 (3.6) 24.0 98
EPS Growth for Trailing Twelve Months 52.4 22.5 22.7 13.3 76
EPS Growth for Past 5 Years 13.6 24.7 18.9 11.5 55
Worst R Best = Co. underperforming = Co. outperforming

Company Quality
Some companies excel in obtaining high margins (watch out for very low tax rates, which may reflect special benefits that often won't persist indefinitely) while others are highly
efficient. Still others are strong in both respects. These trade-offs are balanced in the Management Effectiveness returns, which combine both factors. TTM = Trailing Twelve Months.

Company Rank MDT MDT MDT


Profitability Ratios (%) MDT Industry Sector S&P 500 in Industry vs. Industry vs. Sector vs. S&P 500
Gross Margin for Trailing Twelve Months 75.9 59.2 65.3 44.7 85
Gross Margin for Past 5 Years 75.2 58.0 66.9 44.6 87
Operating Margin for Trailing Twelve Months 25.1 17.5 22.3 19.4 93
Operating Margin for Past 5 Years 23.4 15.9 17.9 18.3 93
EBITD Margin for Trailing Twelve Months 31.9 21.5 28.1 24.2 95
EBITD Margin for Past 5 Years 28.6 21.2 25.2 22.8 96
Pretax Margin for Trailing Twelve Months 25.1 17.5 22.3 16.9 93
Pretax Margin for Past 5 Years 23.4 15.5 18.1 17.3 90
Net Margin for Trailing Twelve Months 19.6 11.6 16.9 12.8 93
Net Margin for Past 5 Years 18.7 10.8 12.8 12.1 91
Effective Tax Rate for Trailing Twelve Months 21.9 26.8 25.5 28.7 27
Effective Tax Rate for Past 5 Years 20.0 27.2 26.4 30.1 35
Company Rank MDT MDT MDT
Efficiency Ratios (TTM) MDT Industry Sector S&P 500 in Industry vs. Industry vs. Sector vs. S&P 500
Asset Turnover 0.6 0.8 0.8 0.9 49
Receivables Turnover 4.9 6.2 7.1 11.0 29
Inventory Turnover 2.6 5.3 8.1 13.0 83
Revenue/Employee $402,776 $371,248 $681,383 $815,620 88
Net Income/Employee $78,915 $59,139 $130,274 $104,395 90
Company Rank MDT MDT MDT
Management Effectiveness Ratios (%) MDT Industry Sector S&P 500 in Industry vs. Industry vs. Sector vs. S&P 500
Return on Assets for TTM 12.0 8.2 8.6 8.1 92
Return on Assets for Past 5 Years 11.8 7.8 6.6 8.3 92
Return on Investment for TTM 14.3 10.0 11.6 10.7 87
Return on Investment for Past 5 Years 14.2 11.0 10.3 12.0 76
Return on Equity for TTM 22.3 15.2 19.2 18.6 93
Return on Equity for Past 5 Years 22.0 14.8 16.9 20.1 94
Worst R Best = Co. underperforming = Co. outperforming

Financial Strength
Quick Ratio (cash and marketable securities divided by current liabilities) and Current Ratio (all current assets divided by current liabilities) give a sense of how readily the company
could cover current obligations if the sales were to stop. Higher ratios indicate greater liquidity. Different businesses have different cash inflow-outflow characteristics, so compare
companies to industry averages. Similar comparisons are relevant for debt ratios (higher ratios indicate more debt and, hence, more financial risk) and interest coverage (lower
numbers signify greater risk).
Company Rank MDT MDT MDT
MDT Industry Sector S&P 500 in Industry vs. Industry vs. Sector vs. S&P 500
Quick Ratio 1.6 2.3 2.0 1.3 52
Current Ratio 1.9 3.3 2.7 1.8 44
Total Debt to Equity 65.1 41.1 44.0 74.6 18
Long Term Debt to Equity 47.5 36.6 36.6 67.1 19
Interest Coverage 13.7 13.4 18.0 13.2 80
Worst R Best = Co. underperforming = Co. outperforming

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