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On Wednesday, Evercore ISI made adjustments to its financial outlook for Medtronic , Inc. (NYSE:MDT), reducing the company’s price target from $105.00 to $103.00, yet reaffirming an Outperform rating. The decision follows a detailed analysis of the company’s financial components and future projections. According to InvestingPro data, Medtronic, with its market capitalization of $108.26 billion, currently trades at a P/E ratio of 25.71x, which appears high relative to its near-term earnings growth potential.
Medtronic’s recent quarterly performance showed a mix of outcomes, with organizational and earnings per share (EPS) figures surpassing expectations, which was somewhat dampened by a miss on gross margins. The company’s fiscal year 2026 (FY26) EPS guidance was reported below the short-term consensus, but Medtronic anticipates high single-digit EPS growth in fiscal year 2027 (FY27). InvestingPro analysis reveals the company’s strong financial foundation, maintaining a 3.24% dividend yield and an impressive track record of 49 consecutive years of dividend payments, demonstrating consistent shareholder returns despite market fluctuations.
The FY26 gross margin includes an impact of approximately 160 basis points from tariffs and product mix changes, such as increased expenses for electrophysiology capital equipment revenue and the ramp-up of the Simplera continuous glucose monitoring system. These are expected to be partially balanced by underlying improvements within the company. For FY27, the high single-digit EPS growth is inclusive of around a 2% headwind from the planned Diabetes business spin-off. Excluding this factor, Medtronic suggests an implied growth rate of approximately 9%.
Additionally, the annualization of fourth-quarter tariffs is anticipated to create an incremental $0.24 of headwind in FY27. Evercore ISI believes this will be counterbalanced by contributions from an extra week in the fiscal calendar and expense management strategies. However, the upcoming transition of Sean Salmon ahead of the company’s electrophysiology ramp and renal denervation launch has sparked some investor questions.
Evercore ISI’s commentary highlighted that despite the moving pieces in Medtronic’s financial landscape, the firm remains committed to delivering high single-digit EPS growth. The reassurance of Medtronic’s adherence to a conservative guidance philosophy, allowing some leeway in both FY26 organic growth and tariff assumptions, underpins Evercore ISI’s continued confidence in the company’s performance. The revised price target of $103 is based on approximately 19 times the calendar year 2025 price-to-earnings ratio, around 15 times EBITDA, and a free cash flow yield of roughly 3.8%. For deeper insights into Medtronic’s valuation and growth prospects, investors can access comprehensive analysis and 8 additional ProTips through InvestingPro’s detailed research report, which provides expert analysis of key financial metrics and growth drivers.
In other recent news, Medtronic, Inc. reported its fiscal fourth-quarter earnings, showcasing a revenue of $8.93 billion, which represents a 5.4% year-over-year organic increase and surpasses the consensus estimate of $8.81 billion. The company’s earnings per share (EPS) rose to $1.62, exceeding the forecast of $1.58. Additionally, Medtronic announced plans to spin off its Diabetes franchise into an independent, publicly traded company, a move expected to be completed within 18 months. This decision follows a 10% increase in sales for the diabetes division, which generated close to $2.5 billion in the fiscal year ending April 2024. Analysts from Citi have maintained a Buy rating on Medtronic, albeit with a reduced price target of $98, while JPMorgan maintains a Neutral rating with a $95 target. JPMorgan expressed skepticism about the value creation from the spin-off, while Citi remains optimistic about Medtronic’s future guidance. Needham analysts continue to hold a Hold rating, awaiting signs of meaningful growth acceleration. Investors are keenly awaiting further guidance from Medtronic’s upcoming earnings report, which is expected to provide more insights into the company’s trajectory.
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