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On Thursday, Bernstein analysts maintained a positive stance on Medtronic , Inc. (NYSE:MDT) shares by reiterating an Outperform rating and a $93.00 price target. The healthcare equipment giant, currently trading at $84.41 with a market capitalization of $108 billion, appears undervalued according to InvestingPro analysis. The firm’s analyst cited several factors contributing to this outlook, including Medtronic’s consistent revenue growth and potential for new product launches to surpass the company’s organic growth projections for fiscal year 2026 (FY26). The analyst also expressed approval of Medtronic’s decision to spin off its Diabetes business, suggesting that such strategic portfolio adjustments could benefit the company in the long term.
Medtronic’s forward price-to-earnings (P/E) multiple was adjusted slightly upwards from 15x to 15.5x, reflecting an improved growth outlook. The company currently trades at a P/E ratio of 23.93x, which InvestingPro data indicates is relatively high compared to its near-term earnings growth potential. This adjustment was applied against Bernstein’s forward earnings per share (EPS) estimate of $5.98 for the period of the fifth to eighth quarters ahead, which was revised down from a previous estimate of $6.17. Notably, the company has maintained dividend payments for an impressive 49 consecutive years, currently offering a 3.32% yield. Despite the lower EPS forecast, the firm’s valuation of Medtronic remains optimistic.
The analyst highlighted that Medtronic’s valuation continues to be attractive compared to its historical averages, sitting at approximately 15.5x the midpoint of the FY26 guidance. This valuation, coupled with what the analyst describes as "low expectations," suggests that there may be more potential for the stock to rise than to fall over the next twelve months.
Medtronic’s strategic move to separate its Diabetes segment is seen as a positive development by Bernstein, with the suggestion that management could consider further significant changes to the company’s portfolio in the future. This spin-off is part of Medtronic’s efforts to streamline its operations and focus on its core growth areas.
In summary, Bernstein’s analysis indicates that Medtronic’s stock is poised for potential upside, with stable revenue growth of 2.72% and strategic business decisions contributing to a favorable outlook for the company’s financial performance. The firm’s unchanged price target of $93 reflects confidence in Medtronic’s prospects for the coming year. InvestingPro analysis supports this view, with comprehensive metrics and additional ProTips available in the detailed Pro Research Report, offering investors deeper insights into Medtronic’s valuation and growth potential.
In other recent news, Medtronic has reported its fiscal fourth-quarter earnings, revealing revenue of $8.93 billion, a 5.4% increase compared to the previous year, which exceeded the consensus estimate of $8.81 billion. Earnings per share also rose to $1.62, surpassing forecasts of $1.58. In a strategic move, Medtronic plans to spin off its diabetes division into a separate publicly traded entity within the next 18 months. This division achieved nearly $2.5 billion in sales for the fiscal year ending April 2024, marking a 10% increase from the previous year. Analysts from Citi have adjusted their outlook on Medtronic, reducing the price target to $98 while maintaining a Buy rating. Evercore ISI also revised its price target to $103, reaffirming an Outperform rating, while JPMorgan reiterated a Neutral rating with a $95 target. These developments highlight the company’s ongoing efforts to optimize its portfolio and focus on growth opportunities.
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