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Medical device manufacturer Medtronic (MDT +1%) posted a healthy Q1 (Jul) performance, lifting its stock toward 52-week highs today. MDT, which commands an expansive portfolio of medical devices, also nudged the low end of its FY25 (Apr) adjusted EPS and organic revenue growth forecasts modestly higher. Outside of its Medical Surgical segment, which barely slipped into negative yr/yr growth territory in the quarter, MDT enjoyed gains across its portfolio, underscoring solid underlying market demand and the benefits of being at the front end of many new product cycles.

• MDT registered adjusted EPS of $1.23, a 2.5% bump yr/yr, and revs of $7.97 bln, a 3.4% improvement as reported and a 5.3% jump on an organic basis. MDT's ninth consecutive earnings beat was supported by accelerating top-line growth and ongoing progress on underlying margin improvement activities, including pricing and cost-out programs.
• MDT's accelerating revenue growth in Q1 was aided by a 5.5% jump in Cardiovascular sales to $3.01 bln. Several businesses within Cardiovascular enjoyed decent growth, underscoring the key to MDT's steady success: its constant investments in technology, which is vital to keep pace with a rapid shift in the treatment of diseases. Neuroscience and Diabetes similarly enjoyed decent revenue growth, further propped up by continuous investments, such as MDT's Pain Stim, which saw 11% growth in its first quarter since launching in the U.S.
• Lagging slightly in Q4 was Medical Surgical, which fell by 0.4% yr/yr, hindered by an unfavorable yr/yr comparison from back-order fulfillment during the first half of FY23. Meanwhile, the Korean market is experiencing a slowdown from ongoing physician strikes, similar to what Intuitive Surgical (ISRG) endured during Q2 (Jun). However, management expects Surgical to return to more normalized growth during the back half of FY25 once these comparisons ease.
• As a result, MDT did not hike its FY25 guidance but did take some of the sting out of its previous worst-case scenario. The company expects FY25 adjusted EPS of $5.42-5.50, up at the low end by $0.02, and organic revenue growth of +4.5-5.0%, also up at the low end by +0.5 pts.

MDT's Q1 results accelerated from last quarter but still ran into some sticky headwinds, keeping a lid on a possibly improved FY25 outlook. MDT can continue to extract benefits from its continuous R&D efforts, tuck-in acquisitions, and strong market share across several categories, including those within its Cardiovascular and Neuroscience segments. MDT's reliance on Medicare reimbursement rates can keep uncertainty high. However, MDT is optimistic that developments on this front are moving in the right direction.

Overall, while MDT does not typically record explosive yr/yr growth each quarter, results tend to improve steadily over time, reflecting the relative stability of the health care sector. MDT also pays investors a solid 3.2% annual dividend yield, recently increasing its dividend at the end of FY24, a typical occurrence for MDT as it has been raising its annual dividend consistently for multiple decades. As such, MDT is worth keeping on the radar.