On Tuesday, Baird adjusted its outlook on Medtronic , Inc. (NYSE:MDT), a global leader in medical technology, services, and solutions, by lowering the company's price target to $82.00 from the previous $87.00. The firm maintained a Neutral rating on the stock.
The revision comes with the anticipation that Medtronic's first-quarter fiscal year 2025 revenue and adjusted earnings per share (EPS) will likely exceed consensus expectations. The focus, according to Baird, is on the conservative nature of the company's full-year 2025 guidance and the sustainability of its high single-digit adjusted EPS growth rates in the second half of the fiscal year.
Baird noted positive developments, including a more stable mid-single-digit top-line growth profile for Medtronic, which is being driven by an increase in contributions from its U.S. Diabetes segment and the early adoption of its U.S. Pulse Field Ablation (PFA) technology.
Additionally, improvements in Medtronic's global operations and supply chain initiatives are showing early signs of stabilizing year-over-year operating margin compression, which could eventually lead to an expansion in margins and adjusted EPS.
Despite these positive indicators, Baird expressed caution due to the company's full-year 2025 adjusted EPS guidance, which assumes an acceleration of adjusted EPS growth towards the latter part of the year. Given the current lack of visibility into the long-term sustainability of this re-accelerating adjusted EPS growth, Baird has chosen to maintain a Neutral stance on Medtronic shares.
In other recent news, Medtronic has experienced significant developments. The company is in the process of finding a replacement for CFO Karen Parkhill, who is set to join HP Inc (NYSE:HPQ). on August 2. In the interim, Gary Corona will assume the CFO role. Despite this executive transition, Medtronic has reaffirmed its financial outlook for the first quarter and full fiscal year of 2025.
In the financial sphere, Medtronic has priced a multi-tranche offering of senior notes totaling €3 billion. This move is aimed at general corporate purposes, including the repayment of existing debts. Analysts, including those from Goldman Sachs and Truist Securities, have expressed varying sentiments towards the company's stock, with Goldman Sachs initiating coverage with a Sell rating due to concerns about increased investment needs to sustain growth.
The company's forecast predicts year-over-year organic sales growth of 4.5-5.0% and an EPS increase of 9.0-11.0%, aligning with consensus estimates. These recent developments underscore Medtronic's ongoing efforts to navigate the competitive landscape of the medical technology industry.
InvestingPro Insights
As Medtronic (NYSE:MDT) navigates a competitive landscape with strategic initiatives, the InvestingPro platform sheds light on key financial metrics and insights that could influence investor perceptions. With a market capitalization of $99.22 billion and a trailing twelve-month revenue of $32.36 billion, Medtronic demonstrates a solid financial presence. The company's revenue growth in the last twelve months as of Q4 2024 stands at 3.64%, signaling steady progress amidst industry challenges.
Investors may find reassurance in Medtronic's consistent dividend payments, which have been maintained for 48 consecutive years and raised for the past 10 years, as noted by InvestingPro Tips. Additionally, Medtronic's stock is known for its low price volatility, providing a sense of stability in an often uncertain market. The company's cash flows have also been robust enough to cover interest payments comfortably, which is a positive indicator of financial health.
For those looking to delve deeper into Medtronic's financials and strategic positioning, InvestingPro offers additional insights, including the fact that management has been aggressively buying back shares, a move that often reflects confidence in the company's future prospects. Moreover, analysts predict profitability for the year, and Medtronic has been profitable over the last twelve months, further cementing its status as a prominent player in the Healthcare Equipment & Supplies industry.
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