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MDT Stock Trades Near 52-Week High: Is it a Smart Buy Now?
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Following a slump, shares of Medtronic (MDT - Free Report) seem to have started to recuperate, possibly banking on a gradually improving investment and research scenario, thanks to the recent monetary policy easing. Closing Wednesday’s trading session at $88.14, shares of this MedTech behemoth are currently trading near the 52-week high of $91.49.
Fed’s latest aggressive 50-bps rate cut, along with the high likelihood of another half a percentage point cut in the rest of 2024, as part of the central bank’s gradual unwinding of its tight monetary policy, is largely going to reduce borrowing costs and drive research and development scenario for the entire MedTech industry. This provides a strong impetus to Medtronic’s stock despite the ongoing global geopolitical pressure, primarily growing tension around the Middle East, with oil prices at risk for a significant escalation in the near term.
MDT shares have appreciated 14.4% over the past three months, outperforming the industry’s rally of 8.6% and the S&P 500 index’s return of 0.4%. The company also strongly outperformed its key rivals like Boston Scientific (BSX - Free Report) , Abbott (ABT - Free Report) and Becton, Dickinson and Company or BD (BDX - Free Report) over the past 90 days.
Three-Month Price Performance of MDT
Image Source: Zacks Investment Research
MDT Ahead of Moving Averages
Technical indicators, too, are supportive of Medtronic’s improving stock momentum. The stock is trading above its 50-day and 200-day moving averages, indicating robust upward momentum and price stability. In fact, the stock witnessed a golden crossover on Sept. 6, 2024, and since then, the 50-day moving average has been ahead of the 200-day moving average. This technical strength reflects the market’s confidence in Medtronic’s financial health and fundamentals.
MDT Above the 50- and 200-day SMA
Image Source: Zacks Investment Research
Will Rate Cut Boost MDT's Performance?
We believe MedTech manufacturers like Medtronic will be one of the biggest gainers from the Fed’s interest rate cut. MedTech players were seen restricting their R&D activity in the past four years, initially to accustom to the pandemic-led transforming market mechanism and later being hurt by the continuously growing rate of innovation-bound borrowings. These apart, high interest rates were also responsible for reducing the aggregate demand of end users, leading to demand-supply disequilibrium and price drop. Over the past several months, all these have significantly discouraged industry players like Medtronic from investing in medical technology innovations, resulting in a slower pace of growth.
The latest rate cut should help Medtronic expand in MedTech's most attractive markets like AFib, structural heart, robotics, neuromodulation, hypertension and diabetes by speeding up and scaling up its research and development work.
The rate cut might also improve the company’s shrinking margin scenario over the near term.
MDT Has Impressive Liquidity and Solvency Position
Medtronic’s strong liquidity position should allow it to meet its near-term debt obligations. Medtronic apparently looks quite burdened by debt, with total debt (including the current portion) of $27.87 billion as of July 26, 2024. The company’s cash and cash equivalents were $7.8 billion at the end of the first quarter of fiscal 2025. Although the quarter’s total debt was much higher than the corresponding cash and cash equivalent level, the short-term payable debt of $1.55 billion remains lower than the short-term cash level. The company’s times interest earned ratio is also at an impressive level of 7.7, indicating that Medtronic is well capable of paying the interest on its business debts on time.
Attractive Dividend Paying Stock
Medtronic, as a popular dividend-paying stock, managed to increase its quarterly dividend for the 47th straight quarter this May. Effective May 22, 2024, Medtronic's board of directors approved an increase in its cash dividend for the first quarter of fiscal year 2025, raising the quarterly amount to $0.70 per ordinary share. This represents an annual amount of $2.80 per ordinary share. The current payout ratio stands at 52.9%. This compares with the payout rate of the industry, which stands at a lower level of 36.8%.
Medtronic's Dividend Track Record
Image Source: Zacks Investment Research
MDT's Earnings Estimates Trend Up
The consensus mark for fiscal 2025 earnings stands at $5.44 per share, suggesting growth of 4.6% from the year-ago actual. The estimate has been revised upward by 2 cents over the past 60 days by nine analysts, with no revision in the opposite direction.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
Image Source: Zacks Investment Research
Attractive Valuation
Meanwhile, if we look at the value components, MDT has a Value Score of B at present.
This is evident from the Price/Earnings ratio. MDT shares currently trade at 15.71X forward earnings, well off their five-year high of 30.08X and below the median of 17.21X. The stock is also trading significantly below the industry’s 21.55X, which indicates a solid opportunity for investors.
Image Source: Zacks Investment Research
Middle-East Snag Poses a Threat to MDT Stock
The present global economic challenges and uncertainties have made it harder for companies like Medtronic to manage operations and predict financial outcomes. Over the past month, geopolitical tension has intensified significantly around the Middle East with fears that the conflict will grossly disrupt oil supplies in this region, leading to a rally in oil prices. This might lead to potential energy shortages and worsen the already-disrupted supply chain. Reflecting this risk, Medtronic’s operational results might again be hampered in the coming days. In addition, supply-chain risks associated with inflation, the threat of recession, liquidity crisis and currency volatility persist.
Final Take on MDT
Medtronic continues to outperform its peers in a challenging market for medical devices, banking on its continued efforts to focus on optimizing business to drive sustainable profitability and stable liquidity. We expect the company to significantly reduce the cost of manufacturing products and improve the margin scenario, benefiting from the easing monetary policy.
While the company still faces uncertainty due to supply issues and other macroeconomic headwinds, the company’s growth strategies position it for continued success over the upcoming period. The upward revisions in earnings estimates support MDT’s Zacks Rank #2 (Buy). These make MDT worthy of addition to investors' portfolios at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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MDT Stock Trades Near 52-Week High: Is it a Smart Buy Now?
Following a slump, shares of Medtronic (MDT - Free Report) seem to have started to recuperate, possibly banking on a gradually improving investment and research scenario, thanks to the recent monetary policy easing. Closing Wednesday’s trading session at $88.14, shares of this MedTech behemoth are currently trading near the 52-week high of $91.49.
Fed’s latest aggressive 50-bps rate cut, along with the high likelihood of another half a percentage point cut in the rest of 2024, as part of the central bank’s gradual unwinding of its tight monetary policy, is largely going to reduce borrowing costs and drive research and development scenario for the entire MedTech industry. This provides a strong impetus to Medtronic’s stock despite the ongoing global geopolitical pressure, primarily growing tension around the Middle East, with oil prices at risk for a significant escalation in the near term.
MDT shares have appreciated 14.4% over the past three months, outperforming the industry’s rally of 8.6% and the S&P 500 index’s return of 0.4%. The company also strongly outperformed its key rivals like Boston Scientific (BSX - Free Report) , Abbott (ABT - Free Report) and Becton, Dickinson and Company or BD (BDX - Free Report) over the past 90 days.
Three-Month Price Performance of MDT
Image Source: Zacks Investment Research
MDT Ahead of Moving Averages
Technical indicators, too, are supportive of Medtronic’s improving stock momentum. The stock is trading above its 50-day and 200-day moving averages, indicating robust upward momentum and price stability. In fact, the stock witnessed a golden crossover on Sept. 6, 2024, and since then, the 50-day moving average has been ahead of the 200-day moving average. This technical strength reflects the market’s confidence in Medtronic’s financial health and fundamentals.
MDT Above the 50- and 200-day SMA
Image Source: Zacks Investment Research
Will Rate Cut Boost MDT's Performance?
We believe MedTech manufacturers like Medtronic will be one of the biggest gainers from the Fed’s interest rate cut. MedTech players were seen restricting their R&D activity in the past four years, initially to accustom to the pandemic-led transforming market mechanism and later being hurt by the continuously growing rate of innovation-bound borrowings. These apart, high interest rates were also responsible for reducing the aggregate demand of end users, leading to demand-supply disequilibrium and price drop. Over the past several months, all these have significantly discouraged industry players like Medtronic from investing in medical technology innovations, resulting in a slower pace of growth.
The latest rate cut should help Medtronic expand in MedTech's most attractive markets like AFib, structural heart, robotics, neuromodulation, hypertension and diabetes by speeding up and scaling up its research and development work.
The rate cut might also improve the company’s shrinking margin scenario over the near term.
MDT Has Impressive Liquidity and Solvency Position
Medtronic’s strong liquidity position should allow it to meet its near-term debt obligations. Medtronic apparently looks quite burdened by debt, with total debt (including the current portion) of $27.87 billion as of July 26, 2024. The company’s cash and cash equivalents were $7.8 billion at the end of the first quarter of fiscal 2025. Although the quarter’s total debt was much higher than the corresponding cash and cash equivalent level, the short-term payable debt of $1.55 billion remains lower than the short-term cash level. The company’s times interest earned ratio is also at an impressive level of 7.7, indicating that Medtronic is well capable of paying the interest on its business debts on time.
Attractive Dividend Paying Stock
Medtronic, as a popular dividend-paying stock, managed to increase its quarterly dividend for the 47th straight quarter this May. Effective May 22, 2024, Medtronic's board of directors approved an increase in its cash dividend for the first quarter of fiscal year 2025, raising the quarterly amount to $0.70 per ordinary share. This represents an annual amount of $2.80 per ordinary share. The current payout ratio stands at 52.9%. This compares with the payout rate of the industry, which stands at a lower level of 36.8%.
Medtronic's Dividend Track Record
Image Source: Zacks Investment Research
MDT's Earnings Estimates Trend Up
The consensus mark for fiscal 2025 earnings stands at $5.44 per share, suggesting growth of 4.6% from the year-ago actual. The estimate has been revised upward by 2 cents over the past 60 days by nine analysts, with no revision in the opposite direction.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
Image Source: Zacks Investment Research
Attractive Valuation
Meanwhile, if we look at the value components, MDT has a Value Score of B at present.
This is evident from the Price/Earnings ratio. MDT shares currently trade at 15.71X forward earnings, well off their five-year high of 30.08X and below the median of 17.21X. The stock is also trading significantly below the industry’s 21.55X, which indicates a solid opportunity for investors.
Image Source: Zacks Investment Research
Middle-East Snag Poses a Threat to MDT Stock
The present global economic challenges and uncertainties have made it harder for companies like Medtronic to manage operations and predict financial outcomes. Over the past month, geopolitical tension has intensified significantly around the Middle East with fears that the conflict will grossly disrupt oil supplies in this region, leading to a rally in oil prices. This might lead to potential energy shortages and worsen the already-disrupted supply chain. Reflecting this risk, Medtronic’s operational results might again be hampered in the coming days. In addition, supply-chain risks associated with inflation, the threat of recession, liquidity crisis and currency volatility persist.
Final Take on MDT
Medtronic continues to outperform its peers in a challenging market for medical devices, banking on its continued efforts to focus on optimizing business to drive sustainable profitability and stable liquidity. We expect the company to significantly reduce the cost of manufacturing products and improve the margin scenario, benefiting from the easing monetary policy.
While the company still faces uncertainty due to supply issues and other macroeconomic headwinds, the company’s growth strategies position it for continued success over the upcoming period. The upward revisions in earnings estimates support MDT’s Zacks Rank #2 (Buy). These make MDT worthy of addition to investors' portfolios at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.