Should one Buy, Sell, or Hang onto MDT Stock with a Value of $87?
Medtronic, the medical device giant (NYSE: MDT), recently shared its Q3 earnings for fiscal 2025, revealing a revenue of $8.29 billion, slightly below expectations at $8.33 billion. However, the company outdid predictions with an adjusted EPS of $1.39 versus the anticipated $1.36. The company identified reduced inventory levels at some distributors as the main reason for lower sales, a situation they anticipate will persist into Q4.
The stock has scaled up by 8% since the start of 2024, but it has lagged behind the S&P 500 index, recording a 28% increase. A dip in profitability and a narrowed full-year outlook following Q2 negatively impacted the stock's performance. For those seeking smoother returns, the High-Quality Portfolio has excelled, delivering over 91% returns since its inception, outpacing the S&P 500.
Medtronic's revenue amounted to $8.29 billion, showing a 2.5% year-over-year surge. The Cardiovascular segment displayed a 3.7% growth, driven by strong sales of Micra transcatheter pacing systems, PulseSelect systems, and Affera Sphere-9 systems. The Neuroscience division expanded by 4.4%, boosted by double-digit growth in Neuromodulation, including the Inceptiv spinal cord stimulator and Percept RC deep brain stimulator. The Diabetes segment recorded an 8.4% growth, owing to sustained demand for the MiniMed 780G automated insulin delivery system. The Medical Surgical segment, however, dipped by 1.9%, with weaker sales in surgical & endoscopy and acute care & monitoring due to distributor inventory adjustments and a decline in Nellcor blood oxygen products' market share.
Medtronic's operating margin plummeted by 90 basis points to 24.3% in Q2 but improved by 190 basis points quarter-over-quarter and 100 basis points year-over-year to reach 26.2% in Q3. These improvements led to earnings of $1.39 per share, marking a 7% increase from the previous year. Looking ahead, the company upheld its 2025 forecast, expecting organic revenue growth between 4.75% and 5% and adjusted earnings ranging from $5.44 to $5.50 per share, in line with the $5.45 consensus estimate.
Following its Q3 earnings report, MDT stock witnessed a 7% drop. Over the last four years, the stock has consistently underperformed the overall market. It recorded returns of -10% in 2021, -23% in 2022, 10% in 2023, and 0% in 2024.
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As the macroeconomic landscape remains uncertain, with trade tensions and interest rate fluctuations, MDT stock's underperformance of the S&P 500 could continue over the next year. While MDT stock seems to have minimal growth potential, a valuation of $93 per share indicates an 8% premium over its present market price of $87. The stock trades at 16x projected earnings of $5.47 per share for 2025, consistent with its four-year average P/E ratio.
When analyzing Medtronic's competitors, it may be worth examining their key financial metrics to gain additional insights. Explore in-depth company comparisons across various industries at Peer Comparisons.
- The reduction in revenue at Medtronic was mentioned as being due to lower sales at some distributors, which they anticipate will persist into Q4, affecting the 'mdt revenue'.
- Medtronic's Neuroscience division saw a boost of 4.4% in Q3, mainly due to double-digit growth in Neuromodulation, including the Inceptiv spinal cord stimulator and Percept RC deep brain stimulator, contributing to the 'neuromodulation' segment's growth.
- Medtronic's Q3 earnings report led to a 7% drop in MDT stock price, yet a valuation of $93 per share indicates an 8% premium over its current market price of $87, highlighting potential in the 'mdt valuation'.
- To gain additional insights on Medtronic's competitors, investors might consider examining their key financial metrics on Peer Comparisons, under the category of 'medtronic competitors'.