Finance
Why Medtronic stock crashed today
Medtronic (NYSE:MDT) Shares were down 2.8% as of 10:15 a.m. ET this morning, despite beating earnings estimates in the company’s fourth-quarter 2024 earnings report.
In terms of earnings figures, analysts had the medical equipment company expects earnings of $1.45 per share, but Medtronic “beats” it by a penny, reporting $1.46 instead. Similarly, Medtronic exceeded expectations for $8.4 billion in revenue by reporting $8.6 billion.
And yet, shares are down today. Why?
Medtronic Q1 results
Well, the earnings numbers are great, of course, but not all of Medtronic’s news has been good. Fourth-quarter revenue that beat expectations still grew only about 0.5% year over year. And while Medtronic claimed a profit of $1.46, it turns out that this was only the case if you exclude the costs that Medtronic claims are one-time in nature. When calculated according to generally accepted accounting principles (GAAP), Medtronic actually earned just $0.49 per share – down 44% year over year.
I think you’ll agree: this is much less impressive.
Are Medtronic shares worth selling?
On the plus side, Medtronic’s full-year 2024 results were stronger. Full-year revenue grew a respectable 4% to $32.4 billion, while profits fell just 2%. Medtronic posted GAAP earnings of $2.76 per share this year.
Can Medtronic do better than that in fiscal year 2025 (i.e. next year)? Actually it could be.
In terms of guidance, Medtronic management predicts revenue growth of between 3% and 4% this coming year, or at least $33.4 billion. That’s about what Wall Street expected. Likewise, earnings guidance for growth of 4% to 5% to about $5.45 per share, non-GAAP, was only in line with expectations.
And that is exactly Medtronic’s problem. Yes, Medtronic beat earnings in fiscal 2024, but at a valuation of 27 times earnings, that was probably the bare minimum the company needed to do. However, to maintain its 27x earnings valuation, Medtronic also had to promise strong growth for the coming year – and Medtronic failed to do so.
Conclusion: Medtronic stock clearly costs too much. That’s why investors are selling.
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Rich Smith has no position in any of the stocks mentioned. 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.
Why Medtronic stock crashed today was originally published by The Motley Fool
