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Investing.com - Wolfe Research maintained its Peerperform rating on Medtronic, Inc. (NYSE:MDT) on Monday, highlighting both opportunities and challenges for the medical device maker. According to InvestingPro data, the stock is trading near its 52-week high of $96.25, with a YTD return of approximately 18%.
The research firm noted potential for improvement in Medtronic’s gross margins, which have underperformed large-cap peers since 2019, and suggested SG&A costs could be reduced despite the company’s already lean operations.
Wolfe Research expressed concern about Medtronic’s organic revenue growth, describing it as "holding on for dear life near 5%," with 6% growth characterized as "a stretch outcome" and 7% as "near delusion."
The analysis pointed out Medtronic’s distinctive capital allocation approach, being the only large-cap medical technology company in Wolfe’s coverage that returned over 100% of cumulative free cash flow through dividends and share repurchases from 2022 through 2024.
While a dividend cut seems unlikely, the research firm suggested reducing share repurchases in favor of tuck-in acquisitions could be reasonable, though potentially dilutive in the short term, and noted the company’s leverage at 2.9x/2.1x gross/net debt to EBITDA appears appropriate.
In other recent news, Medtronic , Inc. reported its fiscal first-quarter earnings, revealing revenue of $8.54 billion, surpassing the expected $8.38 billion. The company’s earnings per share also exceeded projections, coming in at $1.26 against a consensus estimate of $1.23. This performance has led several firms to adjust their price targets for Medtronic. RBC Capital raised its target to $103, citing a 2% beat on both sales and earnings expectations. TD Cowen reiterated a Buy rating with a price target of $106. UBS raised its price target slightly to $95, noting sales and EPS upside but expressing concerns about the lack of visible growth momentum. Truist Securities increased its target to $96, influenced by activist investor Elliott Management’s involvement, which has already led to board changes and new oversight committees. Bernstein SocGen Group also adjusted its target to $98, reflecting a slight increase in forward earnings estimates.
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