On Thursday, Medtronic , Inc. (NYSE:MDT) received a reiterated Neutral rating from a BTIG analyst following the company's fiscal fourth-quarter 2024 earnings report. Medtronic announced revenue of $8.589 billion, a slight year-over-year increase of 0.5% and a 5.4% organic growth.
The company's adjusted earnings per share (EPS) were $1.46, which is a 7% decrease from the previous year but still above the estimated $1.46 by BTIG and $1.45 by consensus.
The company's performance was noted to be favorable in its Neuroscience, Medical-Surgical, and Diabetes segments, slightly outperforming consensus expectations. Still, the Cardiac & Vascular segment did not meet the consensus, showing a slight decline.
Gross margins (GMs) improved by 20 basis points year-over-year but fell by 30 basis points quarter-over-quarter, still managing to surpass consensus forecasts by 30 basis points. Operating margins (OMs) experienced a decline of 200 basis points year-over-year, despite a 170 basis point improvement from the previous quarter. This figure was 50 basis points lower than the consensus estimates.
Looking ahead, Medtronic set its fiscal year 2025 guidance for organic growth between 4.0% and 5.0%, implying revenue in the range of approximately $33.1 billion to $33.6 billion, with reported growth expected to be between 2.4% and 3.7%.
The adjusted EPS forecast for FY25 is set between $5.40 and $5.50, with the first quarter of FY25 projected to be between $1.19 and $1.21. The guidance for FY25 is seen as slightly more optimistic than anticipated, suggesting some leveraged earnings growth. The company's expectations for the second half of FY25 indicate a need for a boost in both top-line growth and margins, which seems to be a point of concern for investors.
The analyst highlighted that while Medtronic has demonstrated improved performance over the last five to six quarters, the setup for FY25 includes assumptions about contributions from new products.
These contributions are expected to add approximately 50 basis points to growth, leaving investors uncertain about whether these new products will drive growth beyond the implied 4.75% organic growth for the second half of FY25. The report suggests that Medtronic's stock could see upward movement if growth in the latter half of FY25 exceeds expectations, but this would require investor patience.
InvestingPro Insights
In light of Medtronic's recent earnings report and the subsequent analyst rating, it's valuable to consider additional insights that could inform investor decisions. Medtronic's market capitalization stands at a robust $108.04 billion, reflecting its significant presence in the healthcare equipment and supplies industry.
Despite concerns about the company's near-term earnings growth, Medtronic's P/E ratio is at 25.98, which indicates high investor expectations for future earnings. Still, the adjusted P/E ratio for the last twelve months as of Q3 2024 is lower at 21.0, suggesting a more favorable valuation when considering normalized earnings.
Medtronic's commitment to shareholder returns is evident, as highlighted by two notable InvestingPro Tips: the company has raised its dividend for 10 consecutive years and has maintained dividend payments for an impressive 48 consecutive years. This consistency is complemented by a dividend yield of 3.22%, which is attractive to income-focused investors. Moreover, the company's cash flows have been strong enough to cover interest payments, reinforcing its financial stability.
For investors seeking a deeper dive into Medtronic's financial health and future prospects, there are additional InvestingPro Tips available at https://www.investing.com/pro/MDT. With a total of 10 tips listed, including the company's low price volatility and its position as a prominent player in the industry, these insights could provide a more nuanced understanding of Medtronic's investment potential. Interested investors can take advantage of a special offer using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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