Shares of Medtronic (MDT, Financial) experienced a significant price decline, dropping 6.58%. This movement follows the company's recent fiscal 2025 third-quarter results announcement, where revenue lagged behind expectations, despite an earnings beat.
Medtronic announced a third-quarter revenue of $8.3 billion, marking a 2.5% increase from the previous year but slightly missing the consensus estimate of $8.33 billion. The company's diluted EPS was $1.01 on a GAAP basis, while its adjusted EPS stood at $1.39, surpassing the average analyst estimate of $1.35 with a 7% year-over-year increase. CEO Geoff Martha attributed the revenue shortfall to changes in U.S. distributor buying patterns, expressing optimism that these issues would be resolved shortly.
Despite the recent drop in Medtronic's share price to $86.70, the company maintains its forecast for organic revenue growth in fiscal 2025, estimating an increase of 4.75% to 5%. The adjusted EPS for the fiscal year is projected between $5.44 and $5.50, with the midpoint slightly above the Wall Street consensus of $5.45.
Analyzing Medtronic's stock valuation, the current Price-to-Earnings (P/E) ratio is 26.51, and the company's market capitalization is approximately $111.17 billion. Notably, Medtronic's GF Value is estimated at $92.43, indicating that the stock is "Fairly Valued" considering its current market price. For detailed information on Medtronic's GF Value, please visit the GF Value page.
Medtronic's financial indicators show mixed signals. The company exhibits high profitability with an operating margin of 17.41% and a net margin of 13%. However, analysts have raised concerns about the company's declining gross and operating margins over recent years. Medtronic's Altman Z-score of 2.93 places it in the grey zone, suggesting moderate financial distress, though not indicative of imminent bankruptcy risks.
The stock's Price-to-Sales (P/S) ratio is close to a two-year high at 3.68, while its dividend yield of 3.21% is near a two-year low, reflecting decreased appeal to dividend-focused investors. Meanwhile, Medtronic has been issuing new debt totaling $3.6 billion over the past three years, which is manageable given its overall debt levels. Additionally, insider selling activity has been noted with 22,287 shares sold over the past quarter.
