Is Medtronic Stock a Buy Pre-Q4 Earnings? Key Metrics to Watch

Medtronic plc MDT is scheduled to report fourth-quarter and full-year fiscal 2025 results on May 21, before the opening bell.

In the last reported quarter, the company’s adjusted earnings of $1.39 exceeded the Zacks Consensus Estimate by 2.21%. Medtronic beat estimates in each of the trailing four quarters, the average surprise being 1.75%.

The Zacks Consensus Estimate for fiscal fourth-quarter revenues is pegged at $8.81 billion, suggesting growth of 2.6% year over year. The consensus estimate for fourth-quarter earnings is pegged at $1.58 per share, indicating an 8.2% rise on a year-over-year basis. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)

Q4 Estimates for MDT Move South in 3 Months

Fiscal fourth-quarter earnings estimates for Medtronic have declined 1.9% to $1.58 per share over the past 90 days.

Despite the company registering earnings beat over the trailing four quarters, estimates have been southbound, reflecting challenges due to rising costs and expenses as a result of inflationary and global geopolitical pressure through the months of the fiscal fourth 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.  With a major manufacturing presence in Mexico and Canada, the company is perhaps one of the most geopolitically entangled. The upcoming earnings release may shed light on how exposed the company is to cross-border tariff disruptions.

Let’s look at how things have shaped up for Medtronic before the announcement.

Factors to Focus on Ahead of MDT's Q4 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. With regard to procedural volumes, in addition to an incremental China VBP, the company has been seeing lower volumes in elective coronary PCI, GI procedures, TAVR, spinal cord stim and some less emergent surgical procedures. This might have once again put pressure on the company’s bottom line in the fourth quarter.

Although March data from the U.S. Bureau of Labor Statistics (BLS) indicates a slowdown in core inflation, the previous two months recorded relatively higher percentages. Additionally, a high-interest rate environment through the fiscal fourth quarter may have made borrowing more challenging during this period.

Added to this, unfavorable currency movements are once again likely to have acted as a major dampener during the fiscal fourth quarter, as in the case of other important MedTech players. Medtronic expects its fiscal 2025 fourth-quarter revenues to reflect an unfavorable impact of $125 million to $175 million from currency translation.

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 company’s Established Market Leaders category, the company 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 franchise is expected to have recorded strong growth, driven by the adoption of its latest generation, Micra AV2 and VR2. In Defibrillation Solutions, the Aurora EV-ICD’s adoption is expected to have remained strong in the fiscal third 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 registered growth in the fourth quarter.

Medtronic’s Diabetes unit is likely to have experienced strong growth in the United States in the fiscal fourth quarter, with the global adoption of the MiniMed 780G AID system. The InPen app might have also boosted growth in the fiscal fourth quarter. In Europe, strong adoption of the Simplera Sync sensor might have boosted growth in the fiscal fourth quarter.

What Does Our Model Say?

Our proven model does not conclusively predict an earnings beat for Medtronic this season. 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 carries a Zacks Rank of 3 currently. 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 to the organization, 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 durable 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. Medtronic apparently looks quite burdened by debt, with total debt (including the current portion) of $29.60 billion as of Jan. 31, 2025. The company’s cash and cash equivalents were $7.92 billion at the end of the last-reported quarter.

Although the quarter’s total debt was much higher than the corresponding cash and cash equivalent level, the short-term payable debt of $2.62 billion remains lower than the short-term cash level. The company’s times interest earned ratio is also at an impressive level of 7.9, indicating that Medtronic is well capable of paying the interest on its business debts on time.

Medtronic Shares vs. Industry and S&P

In the fiscal fourth quarter, Medtronic stock declined 5.9% compared with the industry’s 5% drop and the S&P 500 dip of 8.2%. The company underperformed its direct peers, such as Abbott’s ABT 2.7% rise and Boston Scientific’s BSX 0.5% rise during this time span.

Fiscal Q4 Price Comparison

Medtronic Trading Cheaper Than Industry, S&P

Going by the Price/Earnings ratio, MDT shares currently trade at 14.24X forward earnings, well below the median of 16.25X. The stock is also trading significantly below the industry’s 21.71X and S&P 500’s 20.43X.

The company is also trading at a significant discount to other industry players like Boston Scientific, whose current P/E is 34.55X, and Abbott, whose current P/E is 25.12X. 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.

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, the company battles significant headwinds from macroeconomic issues and rising expenses, which can significantly dent its bottom-line growth. For now, it might be prudent for investors to avoid buying the stock and monitor its upcoming results for a better entry point.

You can see the complete list of today’s Zacks Rank #1 stocks here.

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

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