On Tuesday, Medtronic , Inc. (NYSE:MDT) received a reiterated Hold rating from Needham, as the medical technology company reported its financial results for the second quarter of fiscal year 2025. The firm did not set a new price target. Medtronic's second-quarter revenue and earnings per share (EPS) surpassed consensus estimates, prompting management to slightly raise their full-year 2025 revenue and EPS guidance.
Medtronic experienced a slight deceleration in organic growth, posting a 5.0% increase in F2Q25 compared to 5.3% in the first quarter. This growth was attributed to the launch of new products and improvements in the Diabetes segment. However, the company's non-GAAP gross margin declined by 70 basis points year-over-year in the fourth quarter of fiscal 2024, primarily due to currency challenges that resulted in approximately a 110 basis points impact.
Additionally, Medtronic's non-GAAP operating margin decreased by 90 basis points year-over-year in the same period. This decline was largely influenced by currency-related headwinds, which had an estimated 190 basis points effect. The company anticipates that various factors, including currency fluctuations, inflation, and taxes, will continue to constrain EPS growth for the fiscal year 2025.
Needham's decision to maintain a Hold rating on Medtronic reflects the company's steady performance amidst external pressures. The guidance raise indicates management's confidence in Medtronic's ability to navigate through the ongoing challenges, while the sustained Hold rating suggests a cautious outlook due to the anticipated headwinds.
In other recent news, Medtronic has received FDA approval for its advanced Affera Mapping and Ablation System with Sphere-9 Catheter, designed for the treatment of persistent atrial fibrillation and cavotricuspid isthmus dependent atrial flutter. The company's shareholders have elected all ten director nominees at the 2024 Annual General Meeting, with PricewaterhouseCoopers LLP ratified as the independent auditor for fiscal year 2025.
In terms of financial performance, Baird anticipates that Medtronic's second quarter fiscal year 2025 revenue and adjusted earnings per share will surpass consensus expectations. RBC Capital Markets has upgraded Medtronic's rating from Sector Perform to Outperform, citing improved business fundamentals and management's execution capabilities, while Goldman Sachs (NYSE:GS) maintains its Sell rating, pointing to continuous growth in operating expenses.
Medtronic has also initiated a voluntary field action for its MiniMed™ 600 and 700 series insulin pumps due to potential battery issues. These are all recent developments in Medtronic's journey.
InvestingPro Insights
Medtronic's recent financial performance, as highlighted in the article, aligns with several key insights from InvestingPro. The company's market capitalization stands at $109.93 billion, reflecting its significant presence in the healthcare equipment industry.
InvestingPro Tips reveal that Medtronic has maintained dividend payments for 48 consecutive years and has raised its dividend for 10 consecutive years. This consistent dividend history, coupled with a current dividend yield of 3.2%, underscores the company's commitment to shareholder returns despite the challenges mentioned in the earnings report.
The company's P/E ratio of 28.78 and PEG ratio of 2.99 suggest that the stock is trading at a premium relative to its near-term earnings growth, which aligns with the Hold rating from Needham. However, Medtronic's revenue growth of 3.23% over the last twelve months and an EBITDA growth of 3.28% indicate steady, if modest, expansion.
Investors should note that Medtronic's gross profit margin stands at a healthy 65.52%, while its operating income margin is 19.57%. These figures suggest that despite the margin pressures mentioned in the article, the company maintains robust profitability.
For those seeking a more comprehensive analysis, InvestingPro offers additional tips and insights that could provide further context to Medtronic's financial position and market performance.
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