Key Points
Medtronic beat on sales and earnings this morning.
Management also upped its guidance for fiscal 2026 earnings.
Sales and earnings are both growing by only single digits, and the stock costs 25 times earnings.
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Medtronic (NYSE: MDT) stock had declined 3.6% through 2:45 p.m. ET Tuesday despite beating forecasts for fiscal 2026 first-quarter earnings this morning.
Heading into the report, analysts predicted Medtronic would earn $1.23 per share on under $8.4 billion in first-quarter revenue. In fact, earnings were $1.26 per share, and sales approached $8.6 billion.
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Medtronic Q1 earnings
Sales at the Ireland-based maker of medical equipment grew 8% year over year, of which almost 5% was organic growth. Earnings, however, didn’t.
Medtronic’s $0.81 per-share profit under generally accepted accounting principles (GAAP) was weaker than its adjusted number (its $1.26 headline figure). Earnings also increased only 1% year over year, far slower than sales growth.
Is the stock a buy?
The good news is that CEO Geoff Martha says revenue growth will probably accelerate in the second half of fiscal 2026. The bad news is that it also might not accelerate at all.
Turning to guidance, the company forecasts 5% organic sales growth for the full year, a bit better than in the first quarter, but total revenue growth for the year of only 6.5% to 6.8%. And that’s less than the 8% growth seen in the first quarter.
Management says earnings will increase, and it’s raising guidance to predict per-share profits between $5.60 and $5.66 this year. But these are only adjusted figures and represent only 4.5% earnings growth year over year — which would be slower than sales growth and imply narrowing profit margins.
The worst news of all for investors, though, is that Medtronic stock costs a rich 25 times trailing earnings today, and that’s probably too much to pay for single-digit growth in both sales and earnings.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool recommends Medtronic and recommends the following options: long January 2026 $75 calls on Medtronic and short January 2026 $85 calls on Medtronic. The Motley Fool has a disclosure policy.
