Medtronic (NYSE: MDT) is set to report its fiscal 2024 fourth-quarter results on May 23, with expectations that its revenues and earnings will meet street estimates. The company is anticipated to benefit from increased procedures volume and the expansion of new products. While the stock may trade sideways after the announcement, there is room for growth from its current levels of around $85. Medtronic’s stock performance has seen a decline over the past three years, underperforming the S&P 500. However, with an estimated valuation of $96 per share, there could be an upside of over 10%.
In recent years, Medtronic’s stock has struggled to beat the S&P 500, facing declines of 12% in 2021, 25% in 2022, and 6% in 2023, compared to the S&P 500’s returns of 27%, -19%, and 24% in the same period. This trend of underperformance has been seen not only in Medtronic but also in other heavyweight companies in the Health Care sector and megacap stars like Google, Tesla, and Microsoft. Despite the challenging market conditions, the Trefis High Quality Portfolio, a collection of 30 stocks, has consistently outperformed the S&P 500 each year over the same period.
Looking at Medtronic’s previous quarter, the company saw a 5% year-over-year increase in revenue to $8.1 billion, driven by growth in its MiniMed 780G systems, Neuroscience, Cardiovascular, Medical Surgical, and Diabetes segments. The adjusted operating margin slipped to 25.2%, resulting in adjusted bottom line earnings of $1.30, aligning with the prior-year quarter. As for the upcoming quarter, it is expected that Diabetes and Cardiovascular will continue to lead organic sales growth, with tepid top-line growth due to forex translation losses. Organically, the growth will likely be driven by newer products like the Micra AV pacemaker and the MiniMed 680G insulin system.
Looking ahead, Medtronic’s 2024 organic sales are projected to increase between 4.75% and 5%, with adjusted bottom line earnings in the range of $5.19 to $5.21. Despite the uncertain macroeconomic environment with high oil prices and elevated interest rates, there is potential for Medtronic to see a recovery and outperform the S&P 500. With a current valuation of $96 per share, there is room for growth from its current trading levels of around $85. By analyzing how Medtronic’s peers fare on important metrics, investors can gain valuable insights into the company’s performance within the industry.
