Finance
Is Medtronic Stock a Buy?
Giant in the field of medical equipment Medtronic (NYSE:MDT) has lagged the stock market somewhat over the past five years, partly due to pandemic-related disruptions. Even beyond this global problem, the healthcare giant has had trouble growing its revenue and profits fast enough to excite investors. However, if the latest earnings report is any indication, Medtronic appears to be moving in the right direction, at least within what will arguably become its most important business in terms of driving revenue growth.
Let’s see if, given these developments, it’s worth buying Medtronic stock now.
The fastest growing segment strikes again
Medtronic’s activities are diversified. The company has dozens of devices in four main segments: medical surgery, neuroscience, cardiovascular and diabetes. While Medtronic has been posting consistent earnings, revenue growth hasn’t been as impressive, a phenomenon that predates the pandemic.
In its latest report, for the first quarter of fiscal 2025 ending July 26, Medtronic’s revenues rose 2.8% year over year to $7.9 billion. Medtronic’s best performing segment in this department was diabetes. Sales within this division amounted to $647 million, approximately 11.8% higher than the same period last year.
Diabetes is Medtronic’s smallest segment in terms of revenue, but has been growing faster than the rest of the activities for some time. The recent boost is partly due to Medtronic’s latest insulin pump, the MiniMed 780G, which was approved in the US in April 2023. One of the biggest advantages of this device is that it has an automated insulin delivery system (AID) that makes life easier for diabetes patients. patients. For the past two quarters, the 780G has been the top-rated AID by dQ&A, a diabetes-focused research firm.
There’s more good news for Medtronic. The company recently received approval in the US for a continuous glucose monitoring (CGM) system called Simplera. It also announced a partnership with Abbott Laboratoriesone of the world leaders in the CGM market. Abbott will be responsible for providing a CGM compatible with Medtronic’s devices, which will be sold exclusively by the latter. In other words, Medtronic continues to innovate and advance its diabetes business.
In another five years, it should account for a much larger share of total sales and help improve sales growth.
The future is slowly but surely taking shape
Diabetes is a global epidemic affecting approximately half a billion adults worldwide. And some have predicted that this number will continue to rise as it has in recent decades. There will continue to be a great need for products that help simplify the lives of these patients. Medtronic is one of the more prominent companies in this niche, which could provide the company with significant tailwinds in the long run. It won’t happen overnight, but it is already happening.
However, that won’t be the only growth opportunity for Medtronic. The company is still testing its robot-assisted surgery (RAS) device, the Hugo System. As Medtronic noted last year, robotic surgeries represent less than 5% of the total procedures that can be performed as such, so there is huge runway in this area as well. Again, it could be a few more years before the Hugo is approved in the US, where it is currently being tested, although it is being used abroad in some countries.
So it will take some patience, but Medtronic’s financial results, which aren’t terrible right now, should improve eventually. Of course, the healthcare giant remains a top dividend pick. The company has now increased its payouts for 47 years in a row. It’s getting closer to the coveted thing Dividend King status. Medtronic has a forward yield of 3.13% compared to the S&P500‘s average of 1.32%. The company is a reliable, stable dividend payer that can be owned for a long time.
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Prosperity Junior Bakiny has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Abbott Laboratories. The Motley Fool recommends Medtronic and recommends the following options: long January 2026 $75 calls on Medtronic and short January 2026 $85 calls on Medtronic. The Motley Fool has one disclosure policy.
Is Medtronic Stock a Buy? was originally published by The Motley Fool
