Medtronic’s Earnings Call Highlights Strong Growth and Strategic Moves

Medtronic ((MDT)) has held its Q4 earnings call. Read on for the main highlights of the call.

Medtronic’s recent earnings call showcased a strong performance, with positive revenue growth particularly highlighted in the Cardiovascular and Neuromodulation segments. The strategic decision to spin off the Diabetes business was well-received, aiming to enhance focus on higher-margin growth areas. Despite these positives, there were noted concerns regarding the impact of tariffs and currency headwinds on the company’s financials.

Strong Revenue Growth

The company reported a robust 5.4% organic revenue growth in Q4, with significant acceleration in the Cardiovascular segment at 8%. Neuromodulation and Diabetes segments also contributed notably to this growth, underscoring Medtronic’s strong market position.

Cardiac Ablation Solutions Surge

Medtronic’s Cardiac Ablation Solutions experienced nearly 30% growth, driven by high demand for its Affera PFA products and the Sphere-9 focal catheter. This surge highlights the company’s successful innovation and market penetration in this area.

Neuromodulation Leads Market

The Neuromodulation segment grew by 10%, with a 12% increase in Pain Stim and a 15% growth in the US, maintaining its number one global position in Spinal Cord Stimulation (SCS).

Diabetes Segment Growth

The Diabetes segment achieved a 12% growth, marking the sixth consecutive quarter of double-digit growth. This was largely driven by strong contributions from the MiniMed 780G and Simplera Sync sensor.

Significant Operational Leverage

Medtronic achieved high single-digit operating profit and low double-digit EPS growth, with Q4 EPS growth of 11%, reflecting the company’s efficient operational management.

Portfolio Milestones

Two of Medtronic’s businesses, Cardiac Ablation Solutions (CAS) and Ear, Nose, and Throat (ENT), reached $1 billion in annual revenue, joining ten other businesses that have achieved this milestone.

Separation of Diabetes Business

The decision to separate the Diabetes business into a standalone public company is seen as a strategic move to focus on growth and investment in higher-margin areas.

Impact of Tariffs

Potential impacts from US/China tariffs could affect the cost of goods sold by $200 million to $350 million in fiscal year 2026, posing a challenge to Medtronic’s financial outlook.

Diabetes Business Margins

The Diabetes segment has lower gross and operating margins compared to the overall company, which affects Medtronic’s margin profile.

Currency Headwinds

The company faced a 70 basis points decline in gross margin year-over-year due to unfavorable foreign exchange rates and product mix.

Back-end Loaded Earnings Growth

Projected EPS growth for fiscal year 2026 is expected to be back-end loaded, with minimal growth anticipated in Q1.

Forward-Looking Guidance

For fiscal year 2026, Medtronic anticipates organic revenue growth of approximately 5% and EPS growth of about 4%, excluding the impact of tariffs. The company plans to focus on high-margin growth markets and innovations, such as the US launch of its Hugo robot and Symplicity hypertension procedure.

In summary, Medtronic’s earnings call reflected a positive sentiment with strong revenue growth across key segments. The strategic spin-off of the Diabetes business and focus on high-margin areas are expected to drive future growth. However, challenges such as tariffs and currency headwinds remain potential hurdles. Overall, Medtronic is positioned for continued success with its strategic initiatives and market leadership.