On Friday, UBS maintained its Sell rating on Medtronic , Inc. (NYSE:MDT) but slightly increased the price target to $76.00 from $75.00. The firm recognized Medtronic's solid performance in the fourth fiscal quarter of 2024, highlighting the improving momentum in key business segments.
Medtronic's sales and earnings per share (EPS) exceeded expectations, particularly driven by the U.S. launch of the new 780G automated insulin delivery system, which represents 8% of the company's total fiscal year 2024 sales.
Despite the positive results, UBS expressed caution regarding the sustainability of the growth, specifically within the Diabetes segment. The firm pointed out that there were areas of weakness, such as below-market growth in Ablation Solutions.
Additionally, Medtronic's management has identified several headwinds for the fiscal year 2025, including persistent inflation, increased research and development (R&D) expenditures, and a higher tax rate.
UBS acknowledged Medtronic's strong quarterly performance and the provided guidance of mid-single-digit organic growth for the fiscal year 2025. The company's ability to sustain its current momentum and execute effectively was noted, with UBS conceding that continued success could potentially challenge their cautious stance.
The analyst from UBS summarized their position, stating that while Medtronic has delivered a solid quarter with sales and EPS upside, they remain skeptical about the longevity of the new product momentum. They also suggested that the consensus EPS for fiscal year 2025 might be set too high, considering the various financial challenges outlined by the company's management.
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