Medtronic PLC Earnings - Q4 2025 Analysis
Positives
- EPS of $1.62, up 11% and 16% at constant currency.
- The company grew 5% in the US, its strongest quarterly US growth in 15 quarters, as it accelerated on the strength of new technology.
- The company delivered mid-single digit organic revenue growth for 10 quarters in a row and expects this to continue through fiscal year 2026, with an increasing contribution from its key growth drivers.
- The company had a strong finish to its fiscal year, growing 5.4%.
- The company's Cardiac Rhythm Management business had a very strong quarter, growing 7% with high-single digit growth in both Defibrillation Solutions and Cardiac Pacing Therapies.
Q&A Highlights - Q4 2025
Analyst asked about the company's approach to conservatism in their financial reporting and how they plan to offset potential headwinds in the coming year.
The company aims to be conservative in their financial reporting, and they are currently monitoring the situation to determine how to best offset potential headwinds.
Analyst asked about the company's framework and visibility for achieving high-single-digit EPS growth in FY 2027.
The company's framework for achieving high-single-digit EPS growth in FY 2027 is still being developed, and they are not yet able to provide visibility on this target.
Analyst asked about the impact of tariffs on the company's operating profit and the pressure on Diabetes products.
The company's operating profit is expected to be impacted by tariffs, with a potential impact of 2.2-3.2 points on op profit growth. The launch of the Simplera product is putting pressure on the company's margin rate, with a 60-basis-point impact on the GM level, which will translate into earnings. However, this pressure is expected to improve as manufacturing ramps up.
Analyst asked about the sustainability of Medtronic's fiscal 2027 EPS growth, assuming currency remains the same and favorable and the company executes the Diabetes spin and resulting share buyback.
Thierry Piéton explained that the company's performance in Q4, without FX tailwind and with Diabetes in the portfolio, shows strong growth. He emphasized the fundamentals of the business, including a 5.4% organic revenue growth, an operating margin up by 90 basis points, and EPS growth of 11%. He also mentioned that the company is looking to continue driving leverage on the cost side and improve its operating profit. He concluded that the company's target is to deliver on the framework regardless of the transaction and that the Diabetes spin-off will help accelerate topline growth.
Analyst asked about the company's guidance for earnings and margins.
Thierry Piéton explained that the construction backend is loaded due to investment in growth areas, FX headwind in Q1, and natural hedges being created to lower exposure to FX. He also mentioned that the company is investing in growth areas and that the growth in Q4 is slightly lower than the average of the year.
Analyst asked about the company's approach to pricing and cost management.
Geoffrey Straub Martha explained that the company is creating natural hedges and lowering its exposure to FX through dynamic pricing and paying teams on actual FX basis. He also mentioned that the company's hedging program is a good formula and that they are putting in place natural hedges to lower their overall exposure to FX.
Analyst asked about the company's approach to PFA adoption.
Sean Salmon explained that PFA is replacing an incumbent procedure and is a pretty easy switch, but the company's approach to high blood pressure is more involved and requires training on tools and techniques. He also mentioned that the company is building a practice for a massive patient population and that it is a durable growth driver for the company.
Analyst asked about Medtronic's confidence in getting to the mitigations they described for tariffs and the opportunity to take those further.
Geoffrey Straub Martha, Medtronic's CEO, stated that the company has high confidence in getting to the mitigations they described for tariffs and has an opportunity to take those further. He explained that the company has built a strong muscle in op profit growth, with a 8% growth in Q4 and a guidance of 7% for next year. He also mentioned that the company has a big lead in the Spine business due to its technology and differentiation, and that the demand is stable.
Analyst asked about Medtronic's growth compared to their pure-play peers and where the market is.
Geoffrey Straub Martha, Medtronic's CEO, explained that the company has built a strong muscle in op profit growth, with a 8% growth in Q4 and a guidance of 7% for next year. He also mentioned that the company has a big lead in the Spine business due to its technology and differentiation, and that the demand is stable. He stated that the company is seeing the market growth is stable, and they are seeing their competitive advantage growing. He also mentioned that the company has a durable advantage due to its ability to integrate the workflow and brand AI-enabled technology.
Analyst asked about Medtronic's growth in the rest of the company, specifically in CST or the Spine business, CRM, high-single-digit growth in the quarter, and leadless conduction system pacing, EV-ICD.
Geoffrey Straub Martha, Medtronic's CEO, explained that the company has a broad growth story that is not just focused on PFA and RDN. He mentioned that the company has plans for Peripheral Vascular, Contego, and thrombectomy, and that they are also seeing growth in Pelvic Health with the Tibial system. He stated that the company is confident in doubling their business and that they are in a ballpark to do so in the next couple of years.
Analyst asked about Medtronic's competitors and how they are doing in the market.
Geoffrey Straub Martha, Medtronic's CEO, explained that the company
Analyst asked about pricing and the potential coverage of the patient subset for Medtronic's RDN.
Sean Salmon, the Chief Financial Officer, explained that pricing for CAS will decline, but at a slower rate, and that the company expects to have growth on top of that. He also noted that the company is presenting evidence and guidelines to CMS to support their request for coverage of patients who are unable to control their blood pressure or take medications due to side effects.
Analyst asked about Medtronic's portfolio management strategy and how it relates to their commitment to areas where they can build an ecosystem.
Geoffrey Straub Martha, the CEO, explained that Medtronic is committed to areas where they can build an ecosystem and Diabetes was one of those areas, but they are now looking to separate that. He noted that the company is looking at their portfolio and will continue to do so, both with additions and subtractions, and that they are looking to do more tuck-in M&A to support their strong market positions.
