Medtronic: The Opportunity Gets Healthier for Income Investors

Key Points

• Medtronic is set up for a reversal that the Q1 results and guidance affirmed.
• Analysts, institutions, and activists are buying this stock and show high conviction in the turnaround's success.
• The Dividend Aristocrat yields about 3.0% in mid-August, and the distribution will likely continue growing for years. 

Medtronic’s NYSE: MDT FQ1 results and guidance update did not spark a rally in the share price. Still, they did affirm a robust outlook that includes accelerating business growth, improving profitability, and reversing the stock price action.

The critical takeaways are that growth was present, outperformed the consensus reported by MarketBeat, and guidance was improved.

Among the catalysts for performance were tariffs, specifically a less-than-expected impact, which is expected to carry through the year’s end.

Activists, Analysts, and Institutions are Buying Medtronic in 2025

The sell-side activity in MDT shares is remarkable, highlighting the deep value and market conviction toward the turnaround efforts. The activity includes a 10% stake by Elliot Management, which views the company as undervalued and aims to improve it.

Their stake resulted in two new board positions and committees aimed at uncovering opportunities to enhance performance, accelerate growth, and unlock value.

Analysts and institutional activity are also robust, supporting the reversal outlook with increased coverage, firing sentiment, and an uptrend in the price target revisions.

Looking at the institutions, MarketBeat data shows that they've been accumulating every month in 2025 up until mid-August. They offer a strong foundation and a favorable market environment, holding over 80% of the stock.

The analysts rate this healthcare stock as a Moderate Buy, up from last year’s Hold, with the price target rising. The recent revisions led to an above-consensus level of $110, about 20% upside from the pre-release closing price. 

A move to the $100 consensus would be significant because it would break the market out of a trading range and set a new high; a move to $110 would be even more so. 

Medtronic Outperforms in Q1, Raises Profit Guidance, Affirms Acceleration

Medtronic had a solid quarter in Q1 despite macroeconomic headwinds and uncertainty. The company’s revenue grew 8.5% to $8.5 billion, outpacing the consensus by $0.130 billion. The strength was driven by all segments, led by an 11.5% increase in Diabetes revenue.

The 11.5% gain is critical as this segment is expected to be spun off, unlocking segment value and allowing the remaining business to focus on higher-margin revenue streams. Other segments, including Neuroscience, Medical/Surgical, and Cardiovascular, grew by 4.4%, 4.3%, and 9.3%, respectively.

The margin news is also good. Despite mixed results on a line-by-line basis, the combination of internal efforts, improving revenue leverage, and lower-than-expected tariffs led to better-than-expected earnings.

The $1.26 is up only 2% compared to last year, and outpaced consensus by 3 cents, leading management to upgrade the full-year outlook. The impact of tariffs was reduced by $15 million, and the forecast for EPS by a dime, putting the new low-end at the prior high.

The critical detail is that management expects revenue growth to accelerate in the back half of the fiscal year, the earnings outlook is improved, and it may be underestimating the strength. 

The Technical Outlook: Medtronic Retreats to Support, Market Buys

Medtronic’s share price fell more than 3.5% following the Q1 release and guidance update, but is unlikely to fall much further. The market retreated to critical support at a cluster of moving averages where buying was present. Assuming the market follows through on this signal, MDT’s stock price action aligns with a market reversal and will likely result in a quick rebound. 

If not, MDT could fall to a lower level where a deeper value would be present, but that is not expected. The more likely scenario is sideways to upward movement for the remainder of calendar Q3 2025 with potential for a new multi-year high by the year’s end.