What’s Next For Medtronic Stock?

Medtronic (NYSE: MDT) reported its Q2 fiscal 2025 results (fiscal ends in April) last week, with revenues and earnings exceeding the street estimates. The company reported revenue of $8.4 billion and adjusted earnings of $1.26 per share, compared to the consensus estimates of $8.3 billion and $1.25, respectively. The company continued to benefit from increased adoption of its new products, including MiniMed 780G and Evolut FX+, among others. In the sections below, we discuss Medtronic’s Q2 performance and the impact on its stock price.

How Did Medtronic Fare In Q2?

Medtronic’s revenue of $8.4 billion in Q2 was up 5.3% y-o-y, partly due to higher sales of its MiniMed 780G insulin delivery systems. Looking at segments, the Neuroscience segment saw 7.1% growth, Cardiovascular sales were up 6.1%, Medical Surgical up 1.2%, and Diabetes sales were up 12.4% year-over-year. Within Neuroscience, neuromodulation sales were up 13% driven by the Percept RC deep brain stimulator.

Although Medtronic saw its sales rise, its adjusted operating margin slid 90 bps to 24.3% in Q2. Higher revenues and margin contraction resulted in the bottom line of $1.26 on an adjusted basis, up only a cent above the $1.25 figure it reported in the prior-year quarter. Looking forward, Medtronic expects its organic sales to rise between 4.75% and 5%, and its adjusted earnings to be in the range of $5.44 and $5.50 in fiscal 2025.

What Does This Mean For MDT Stock?

MDT stock is up just 6% this year, underperforming the broader markets, with the S&P 500 index rising 25%. Notably, MDT stock has performed worse than the broader market in recent years. Returns for the stock were -10% in 2021, -23% in 2022, and 10% in 2023. In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, is less volatile. And it has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.

Given the current uncertain macroeconomic environment around rate cuts and potential impact of tariffs (if any), could MDT face a similar situation as it did in recent years and underperform the S&P over the next 12 months — or will it see a recovery? From a valuation perspective, we think MDT stock has only a little room for growth. We estimate Medtronic’s Valuation to be $90 per share, just 5% above its current market price of $86. Our forecast is based on 16x expected earnings of $5.47 in 2025. The 16x figure aligns with the stock’s average P/E ratio over the last three years.

Overall, Medtronic appears to be benefiting from its new products and the diabetes segment will likely continue to drive the sales growth in the near term. Still, with its stock already trading at 16x forward expected earnings, we think investors will likely be better off waiting for a dip for robust long-term gains.

While MDT stock looks like it is appropriately priced, it is helpful to see how Medtronic’s Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.

[1] Returns as of 11/26/2024
[2] Cumulative total returns since the end of 2016