MDT Stock Up on Q3 Earnings and Revenue Beat, Margins Down

Core Insights - Medtronic plc (MDT) reported third-quarter fiscal 2026 adjusted earnings per share (EPS) of $1.36, a decrease of 2.2% year-over-year, but exceeded the Zacks Consensus Estimate by 2.07% [1] - The company achieved worldwide revenues of $9.02 billion, reflecting an 8.7% increase year-over-year and surpassing the Zacks Consensus Estimate by 1.35% [2] Revenue Breakdown - MDT's revenues are categorized into four segments: Cardiovascular, Medical Surgical, Neuroscience, and Diabetes - Cardiovascular revenues grew 10.6% organically to $3.46 billion, with Cardiac Rhythm & Heart Failure sales reaching $1.86 billion, up 17% year-over-year [3][4] - Medical Surgical sales totaled $2.17 billion, up 2.7% year-over-year, with Acute Care & Monitoring revenues increasing by 7% to $519 million [5] - Neuroscience revenues were $2.56 billion, up 2.5% year-over-year, while Diabetes revenues rose 8.3% organically to $796 million [6] Margin Performance - The gross margin contracted by 265 basis points to 63.8%, attributed to a 17.3% increase in the cost of products sold [7] - Research and development expenses rose 7% year-over-year to $722 million, and selling, general, and administrative expenses increased by 8.8% to $2.96 billion [7] - The adjusted operating margin fell by 253 basis points year-over-year to 23% [7] Fiscal Outlook - For fiscal 2026, Medtronic projects organic revenue growth of 5.5%, with the Zacks Consensus Estimate for worldwide revenues at $36.04 billion [8] - The full-year adjusted EPS is expected to be in the range of $5.62-$5.66, consistent with the Zacks Consensus Estimate of $5.64 [10] Strategic Developments - During the quarter, Medtronic received CE Mark for Sphere-360 and FDA clearance for Hugo robotic-assisted surgery [12] - The company executed its M&A strategy with two key transactions involving CathWorks and Anteris [12] Stock Performance - Following the earnings announcement, MDT shares rose by 2.9% in premarket trading [2] - The overall performance indicates strength in the portfolio, with organic revenue growth exceeding company guidance [11]