• Revenue: $8.3 billion, 4.1% organic growth.
• Adjusted EPS: $1.39, up 6.9%.
• Cardiac Ablation Solutions Growth: 22% growth.
• Leadless Pacing Growth: 24% growth.
• Neuromodulation Growth: 13% growth.
• Diabetes Growth: 10% growth.
• Adjusted Gross Margin: 66.6%, up 50 basis points.
• Adjusted Operating Margin: 26.2%, up 100 basis points.
• International Markets Growth: 5% growth.
• Emerging Markets Growth: High single digits.
• Full Year Revenue Guidance: 4.75% to 5% organic growth.
• Full Year EPS Guidance: $5.44 to $5.50.

• Warning! GuruFocus has detected 8 Warning Signs with MDT.

Release Date: February 18, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Medtronic PLC (NYSE:MDT) reported its ninth consecutive quarter of mid-single-digit revenue growth, with strong performances in Cardiac Ablation Solutions, Leadless Pacing, Neuromodulation, and Diabetes.
• The company achieved a 22% growth in Cardiac Ablation Solutions, driven by its Pulse Field Ablation (PFA) portfolio, and expects this rapid growth trajectory to continue.
• Medtronic PLC (NYSE:MDT) reported high single-digit EPS growth, exceeding both consensus and the high end of its guidance range, with improvements in gross and operating margins.
• The company is advancing its innovation pipeline, including the Renal Denervation market, which is expected to be a significant growth driver.
• Medtronic PLC (NYSE:MDT) is making progress with its Hugo soft tissue robotic platform, with plans to enter the US market and expand indications, which is expected to be a growth driver in fiscal '26.

Negative Points

• The Medical Surgical portfolio experienced a change in US distributor buying patterns, impacting surgical performance by a couple of hundred basis points.
• The Peripheral Vascular segment saw a low single-digit decline, attributed to volatility in the China market due to VBP (Volume-Based Procurement) issues.
• The company faces ongoing market and competitive pressures in its Stapling franchise, affecting growth levels in the Surgical business.
• Medtronic PLC (NYSE:MDT) is dealing with foreign exchange headwinds, which have impacted financial performance, although efforts are being made to mitigate this risk.
• The company is navigating challenges in balancing investment in growth drivers with the need to continue driving margin expansion.

Q & A Highlights

Q: As you move into fiscal '26, with multiple growth drivers like Hugo and CAS, is it fair to assume mid-single-digit growth and high single-digit growth in the bottom line? A: Geoff Martha, CEO, confirmed that while specific guidance for FY26 will be provided in the Q4 call, the company remains committed to driving profitable growth and operating leverage. The current fiscal year guidance of 4.75% to 5% organic revenue growth and high single-digit EPS growth remains unchanged.

Q: Can you discuss the drivers of acceleration in Cardiac Ablation Solutions (CAS) for Q4 and fiscal '26, particularly regarding Affera's ramp-up? A: Geoff Martha, CEO, highlighted the strong demand for both PulseSelect and Affera platforms, with Affera receiving high demand globally. Sean Salmon, EVP of Cardiovascular, added that the company is expanding capacity and field presence aggressively, with Affera's launch in the U.S. driving significant growth.

Q: How does Medtronic balance investment in growth programs like pulse field ablation and Hugo with margin expansion? A: Geoff Martha, CEO, emphasized the importance of gross margin improvement and disciplined SG&A growth to fund investments while achieving financial targets. Gary Corona, Interim CFO, noted that gross margin improvements are key to delivering high single-digit EPS growth while funding growth drivers.

Q: What gives you confidence that the US Surgical distributor issue is temporary and not a share loss? A: Geoff Martha, CEO, explained that the issue was due to distributors adjusting inventory levels, expected to resolve by Q1. The company tracks end-customer purchases closely and has not observed share loss, with stable customer purchases and continued strength in non-robotic spaces.

Q: Can you provide an update on the international opportunity for Renal Denervation and what needs to happen for its ramp-up? A: Sean Salmon, EVP of Cardiovascular, stated that reimbursement efforts are ongoing country by country, with supportive guidelines and cost-effectiveness studies aiding the process. The U.S. is expected to be the dominant growth driver, with significant opportunities in Europe and China.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.