MDT Calls: The Stock Behind 66.12% Profit in One Month

It is another spending Monday afternoon and there has never been a better time to trade stock options as the S&P 500 seats confidently at 2,067.51 after midday. I am most interested in having us start our options trading activities this week from the healthcare sector as we explore the options of Medtronic, Inc. (NYSE:MDT).

My first mention of Medtronic on this platform was in October when I wrote about Covidien Plc (COV). By the way, if you followed my recommendation to buy COV Jan 2015 92.500 call (COV150117C00092500) at an asking price of $6.14, you may want to scale out of the trade now or lock in your profits with stop/limit orders now that the contract is up 66.12% to $10.20.

Back to Medtronic

Medtronic with its market capitalization of $71.39B is a medical technology company. The company provides products and therapies for use by medical professionals to meet the healthcare needs of their patients. Its primary products include those for cardiac rhythm disorders, cardiovascular disease, neurological disorders, spinal conditions and musculoskeletal trauma, urological and digestive disorders, and ear, nose, and throat and diabetes conditions.

Why I am Excited About Medtronic Today

Medtronic is the underlying stock behind the bullish momentum that led to the 66.12% gain reported in COV options within one month. Interestingly, Medtronic is making waves on its own as expected and the stock has been consistently making new highs in recent times. In fact, shares of Medtronic made a new 52-week high to $72.54 last Friday to mark a 36.02% improvement over its 52-Week low of $53.33.

MDT Chart

The stock chart above (with my annotations) shows how the shares of Medtronic have traded within the last one year. You will observe that the stock has been consistent in its bullish ascent, which has been going on for the last 10 months. You will also observe a firm holding of the trendline support and the consistent breakout about the trendline resistance to the current $72.54 trading price.

Why You Should Buy MDT Calls

The first reason why I am advocating that you buy MDT call options is the quality of the second quarter (Q2 2015) earnings result that the company posted last week. Medtronic reported earnings of $0.96 per share in line with the consensus analysts’ estimate. The company’s revenue came in at $4.37B to mark a 4% year-over-year increase over the revenues of $4.19 from the same period last year.

The company is recording growth on all fronts as the U.S. revenue increased 5% to $2.45B while its international revenue increased by 5% to $1.90B.  Sales in international markets contributed 44% to the company’s worldwide revenue in the just reported quarter. The company is also forging ahead strongly on the emerging markets front as revenue from emerging markets increased by 12% to $554M.

In addition, the company has reiterated its full-year profit outlook of $4.00 to $4.10 per share even as it raised the lower end of the guidance forecast to a new range of 4% to 5% growth when adjusted for currency fluctuations. More so, Medtronic has reaffirmed its decision to continue with the acquisition of Covidien as the integration planning process continues.

How to Trade MDT Calls

I am optimistic about the opportunities inherent in the options of Medtronic: hence, I recommend buying MDT call options. The MDT Feb 2015 75.000 call (MDT150220C00075000) looks especially attractive at an asking price of $1.43.

— Daily Option Alerts

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