Q1 2025 Earnings Summary
- Medtronic is experiencing sustainable growth driven by exciting new product cycles in high-growth markets, such as neuromodulation with new sensing technologies, and structural heart with the launch of Evolut FX+, leading to strong demand and positive fundamentals.
- The company is proactively investing in high-growth areas through increased R&D and tuck-in M&A, utilizing its strong cash flow to prioritize innovation and expansion in markets like atrial fibrillation ablation, while maintaining operational efficiency.
- Medtronic sees significant opportunity in underpenetrated markets like renal denervation and structural heart, with progress in reimbursement unlocking potential growth, and expects to grow faster than the market in areas like cardiac ablation with its breakthrough technologies PulseSelect and Sphere-9.
- Medtronic is still awaiting broad reimbursement for its Simplicity blood pressure procedure, and delays in securing coverage and coding could impact adoption and revenue growth of this therapy.
- Certain high-growth businesses, like Diabetes and Cardiac Rhythm Management, may not sustain their strong growth rates throughout the year, potentially slowing overall company growth.
- In Europe, cost constraints may lead to slower adoption of new technologies like Pulse Field Ablation, which could impact Medtronic's international growth.
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Sustainability of Q1 Growth
Q: Can you discuss if Q1 performance is sustainable and any one-offs?
A: Geoff stated there were no one-offs driving Q1 performance. He believes growth is sustainable due to new product cycles in high-growth markets, like Neuromodulation reaching double-digit growth driven by new technologies and pricing uplifts. While Diabetes and CRM had particularly strong Q1 growth, he noted they might not sustain that high level throughout the year. -
Margin Outlook and FX Impact
Q: How is your margin visibility for the second half, and did it change recently?
A: Gary explained that underlying leverage is similar on a constant currency basis with high single-digit growth every quarter. FX pressure in the first half will wane in the back half, improving margins. Gross margins were strong, about 40 basis points ahead of consensus, and operating margin was in line. -
Diabetes Strategy and Abbott Partnership
Q: How does the Abbott partnership impact your Diabetes strategy and installed base growth?
A: Que emphasized their strategy hasn't changed. By partnering with Abbott, they can provide access to patients who prefer Abbott's sensor, tapping into the largest CGM installed base in the world. They're integrating Abbott's sensor into their system to offer a one Medtronic experience. -
Afib Ablation Devices and Market Potential
Q: Can you provide perspective on Afra's progress in Europe and expectations for the U.S.?
A: Sean highlighted that demand for Pulsed Field Ablation (PFA) is unbelievably strong, and they're ramping up capacity. Medtronic offers both single-shot and point-by-point approaches with differentiated features. Uptake in Europe is robust, and they anticipate PFA to be a robust growth market for a long time. -
Hugo Robotic System Progress and Commitment
Q: What's the progress and timeline for Hugo, and are you committed to it?
A: Mike reported reaching targeted enrollment in clinical work but didn't provide a specific submission date. Geoff affirmed their absolute commitment to Hugo despite strong competition. They see robotics as crucial across surgical fields and are confident due to their team and technologies. -
TAVR Market and FX Launch Impact
Q: How do you view the TAVR market and the impact of the FX launch on share?
A: Sean stated the TAVR market is solid, with Medtronic growing in line with high single-digit growth. The FX launch has picked up momentum, improving usability without trade-offs. They expect continued growth as they obtain approvals in other geographies.
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