Medtronic (NYSE: MDT) recently released its Q3 fiscal 2025 earnings (fiscal year ends in April), reporting revenue of $8.29 billion, slightly under the consensus estimate of $8.33 billion. However, adjusted earnings per share of $1.39 surpassed expectations of $1.36. The company noted that reduced inventory levels at some distributors affected sales, a trend they anticipate will continue into Q4.
MDT stock has risen 8% since the start of 2024 but has lagged behind the S&P 500 index, which is up 28%. A slight drop in profitability and a narrowed full-year outlook in Q2 negatively impacted the stock’s performance. For investors looking for smoother returns rather than an individual stock, the High-Quality Portfolio has outpaced the S&P 500, delivering over 91% returns since inception.
Lower Surgical and Endoscopic Sales Impact Medtronic’s Growth
Medtronic’s revenue reached $8.29 billion, reflecting a 2.5% year-over-year increase. The Cardiovascular segment grew by 3.7%, fueled by strong sales of Micra transcatheter pacing systems, PulseSelect systems, and Affera Sphere-9 systems. The Neuroscience division expanded by 4.4%, driven by double-digit growth in Neuromodulation, including the Inceptiv spinal cord stimulator and Percept RC deep brain stimulator. The Diabetes segment recorded 8.4% growth, thanks to sustained demand for the MiniMed 780G automated insulin delivery system. However, the Medical Surgical segment declined by 1.9%, with weaker sales in surgical & endoscopy and acute care & monitoring, largely due to distributor inventory adjustments and a drop in market share for Nellcor blood oxygen products.
Medtronic’s operating margin declined by 90 basis points to 24.3% in Q2, but improved by 190 basis points quarter-over-quarter and 100 basis points year-over-year to 26.2% in Q3. Increased revenue and margin expansion led to earnings of $1.39 per share, marking a 7% increase from the previous year. Looking ahead, the company reaffirmed its 2025 forecast, expecting organic revenue growth between 4.75% and 5% and adjusted earnings ranging from $5.44 to $5.50 per share, in line with the $5.45 consensus estimate.
What’s Next for MDT Stock?
MDT stock dropped 7% following its Q3 earnings report. Looking at a broader timeframe, MDT stock has consistently underperformed the overall market over the last four years. The stock saw returns of -10% in 2021, -23% in 2022, 10% in 2023, and 0% in 2024.
By contrast, the Trefis High-Quality Portfolio, which includes 30 stocks, has been significantly less volatile and has consistently outperformed the S&P 500. Why? The HQ Portfolio consists of stocks that have historically delivered better returns with lower risk than the benchmark index, as seen in the HQ Portfolio performance metrics.
With an uncertain macroeconomic environment—including interest rate fluctuations and trade tensions—MDT stock could continue to underperform the S&P 500 over the next year. From a valuation perspective, despite its recent decline, we believe MDT stock has limited growth potential. Our valuation for Medtronic is $93 per share, just 8% above its current market price of $87. MDT stock is trading at 16x projected earnings of $5.47 per share for 2025, in line with its four-year average P/E ratio.
While MDT stock appears to have limited upside, it’s worth analyzing how Medtronic’s competitors perform on key financial metrics. You can explore further company comparisons across industries at Peer Comparisons.
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