Innovations and Strategic Exits to Drive Profitability and Market Expansion

What are the underlying business or industry changes driving this perspective?

• The rapid cadence of new product approvals and ongoing investments in high-growth opportunities, particularly in robotics, AI, and closed-loop systems, is expected to drive revenue growth by enhancing Medtronic's product portfolio and competitiveness in high-value markets.
• The comprehensive transformation of the company focused on restoring earnings power and converting earnings into strong cash flow signifies an operational efficiency improvement that is likely to have a positive effect on net margins.
• The strategic exit from the unprofitable ventilator product line and the increased focus on Acute Care and Monitoring business are expected to remove a drag on profitability and allow for redirected investments towards more promising and innovative healthcare technologies, potentially leading to revenue and earnings growth.
• The strong performance across established market leaders and the highest growth businesses, including double-digit growth in Diabetes and solid performance in Core Spine and Cardiac Pacing, indicate a robust foundation for continued revenue growth across key segments.
• The submission of Evolut FX plus to the FDA and the anticipated product launches across the portfolio signal an acceleration in revenue growth driven by a pipeline of innovative products expected to capture market share and enter new markets.

Figures in the charts may differ slightly from those mentioned in the narrative

How have these above catalysts been quantified?

• Analysts are assuming Medtronic's revenue will grow by 4.3% annually over the next 3 years.
• Analysts assume that profit margins will increase from 13.0% today to 16.4% in 3 years time.
• Analysts expect EPS to reach $4.7 ($6.0 billion in earnings) by about February 2027, up from $3.16 today.

Figures in the charts may differ slightly from those mentioned in the narrative

What could happen that would invalidate this narrative?

• The decision to exit the unprofitable ventilator product line while refocusing on Acute Care and Monitoring could impact near-term revenue and distract management focus, potentially affecting net margins.
• Ongoing investments in Hugo robotic systems may continue to be a significant drag on earnings, given the need for further development and sales force expansion.
• The competitive landscape in the cardiac ablation space, particularly with the introduction of new products like AURORA and PulseSelect, may take time to yield financial benefits as training and adoption ramp up, possibly impacting revenue growth pace.
• Operational challenges associated with the roll-out of new Diabetes products (e.g., MiniMed 780G system with Simplera Sync sensor) in the U.S. market, including awaiting FDA submissions and approvals, could delay revenue growth from this segment.
• The recent decision to retain the Patient Monitoring business and the departure of a key executive, Bob White, might result in transitional challenges and potential disruption, impacting overall operational efficiency and potentially earnings.