MDT Stock Trades Cheaper Than Peers Ahead of Q1 Earnings: Time to Buy?

Medtronic plc MDT is scheduled to report first-quarter fiscal 2026 results on Aug. 19, before the opening bell.

In the last reported quarter, the company’s adjusted earnings of $1.62 exceeded the Zacks Consensus Estimate by 2.53%. Medtronic beat on earnings in each of the trailing four quarters, the average surprise being 2.21%.

The Zacks Consensus Estimate for fiscal first-quarter revenues is pegged at $8.37 billion, suggesting growth of 5.7% year over year. The consensus estimate for earnings is pegged at $1.23 per share, flat on a year-over-year basis.

Q1 Estimates for MDT Move South in 3 Months

Fiscal first-quarter EPS estimates have declined 6.8% to $1.23 over the past 90 days.

Despite the company beating on earnings in each of the trailing four quarters, estimates have been southbound, suggesting challenges due to rising costs and expenses as a result of inflationary and global geopolitical pressure through the months of the fiscal first quarter. Elevated raw material and labor costs are expected to have had a notable impact on the company's profitability during this period. Additionally, the escalating tariff environment is beginning to weigh heavily on the financial outlook of key MedTech players like Medtronic.

Meanwhile, the separation of its Diabetes business into a new standalone company might have impacted its quarterly performance.

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Let’s take a look at how things might have shaped up for Medtronic prior to the announcement.

Factors to Focus on Ahead of MDT's Q1 Earnings

Apart from the tariff issue, we note that, since the past several quarters, Medtronic’s earnings growth has been held back by headwinds like cost escalation and currency impacts. In the fourth quarter of fiscal 2025, adjusted gross margin was down 70 basis points year over year due to foreign exchange.

Although June data from the U.S. Bureau of Labor Statistics indicates a slowdown in core inflation, percentages in the previous two months were relatively higher. Additionally, a high-interest rate environment through the fiscal first quarter might have made borrowing more challenging during this period.

Additionally, unfavorable currency movements are once again likely to have acted as a major dampener during the fiscal first quarter, as in the case of other important MedTech players. Medtronic expects its quarterly revenues to reflect an unfavorable impact of 1-2% from foreign exchange at recent rates.

Further, the earlier-mentioned separation of the Diabetes business (which represented about 8% of the total revenue) might have had a full-quarter impact on the quarterly top line.

Despite these challenges, Medtronic has consistently showcased the resilience of its underlying business fundamentals, delivering mid-single-digit organic revenue growth for several quarters in a row. While its recent product launches have been driving growth across multiple businesses, the swift pace of several compelling product approvals promises consistent growth in the years to come.

Particularly, the company’s pulse field ablation, TAVR, neuromodulation, hypertension, robotics and diabetes businesses are expected to have registered growth in the to-be-reported quarter, banking on several new product launches. Within the Established Market Leaders category, MDT might have witnessed growth in the Cranial & Spinal Technologies segment on the increasing adoption of the AiBLE ecosystem of differentiated spine implants. Further, Mazor Robotics, StealthStation navigation, O-arm Imaging and Midas Rex-powered surgical instruments are expected to have witnessed growth.

In Cardiac Pacing Therapies, the Micra leadless pacemaker and 3830 conduction system pacing lead are expected to have experienced strong growth. In Defibrillation Solutions, the Aurora EV-ICD’s adoption is likely to have remained strong in the fiscal first quarter.

Medtronic is expected to report strong growth within the Neuromodulation segment, driven by its closed-loop sensing technology for both Pain Stim and Brain Modulation. Pelvic Health, Coronary and Peripheral Vascular, too, are expected to have witnessed growth in the yet-to-be-reported quarter.

What Does Our Model Say?

Our proven model does not conclusively predict an earnings beat for Medtronic this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. However, that’s not the case here.

MDT has an Earnings ESP of 0.00% and a Zacks Rank of 3 at present. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Bigger Picture

In recent years, the company has made some foundational changes, including streamlining the operating model, improving global operations, supply chain and quality, and bringing in expertise from outside the industry. It is actively allocating capital to fast-growth MedTech markets and fueling innovative technologies in areas like robotics, AI and closed-loop systems that ensure its growth over the next decade.

Medtronic’s revenues have improved and become more consistent as a result of implementing a performance-driven culture and modifying the incentives underlying new product approvals in major markets. With top priority placed on restoring the company’s earnings power, these actions are expected to eventually result in better-leveraged earnings growth through margin stabilization and improvement.

Medtronic’s highest growth opportunities, comprising 20% of its revenues, are in markets that are large and growing faster than the overall company. For example, in Cardiac Ablation, it has significantly invested in the Electrophysiology arm to expand its share in the attractive $8 billion-plus market.

MDT's Impressive Liquidity and Solvency Position

Medtronic’s strong liquidity position should allow it to meet its near-term debt obligations. The company apparently looks quite burdened by debt, with a total debt (including the current portion) of $28.5 billion as of April 30, 2025. The company’s cash and cash equivalents were $8.97 billion at the end of the last reported quarter.

Although the total debt was much higher than the corresponding cash and cash equivalent level, the short-term payable debt of $2.87 billion remains lower than the short-term cash level. The company’s times interest earned ratio is also at an impressive level of 8.7, indicating that it is well capable of paying the interest on its business debts on time.

Medtronic Shares vs. Industry and S&P

In the fiscal first quarter, Medtronic stock rose 9.3%, outperforming the industry’s 0.4% rise and the S&P 500’s 8.8% increase. The company also outperformed its direct peers, such as Abbott’s ABT 1.9% rise and Boston Scientific’s BSX 0.3% dip during this period.

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Medtronic Trading Cheaper Than Industry, S&P

Going by the Price/Earnings ratio, MDT shares currently trade at 16.23X forward earnings, significantly below the industry’s 22.00X and the S&P 500’s 21.19X.

The company is also trading at a significant discount to other industry players like Boston Scientific, whose current P/E is 31.87X, and Abbott, whose current P/E is 23.94X. This suggests that investors may be paying a lower price relative to the company's expected earnings growth.

MDT has a Value Score of B at present.

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To Conclude

While Medtronic holds immense potential for long-term growth, given its momentum, ongoing comprehensive transformation, breakthroughs and exposure to strong secular growth markets, it battles significant headwinds from macroeconomic issues and rising expenses, which can dent its bottom-line growth. For now, it might be prudent for investors to stay on the sidelines and monitor MDT’s upcoming results for a better entry point.

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This article originally published on Zacks Investment Research (zacks.com).

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