During the October 1 episode of Mad Money, when a caller inquired about Medtronic plc (NYSE:MDT), Jim Cramer said:
Okay, now, you know, I am so glad you brought this stock up… This is why my job’s hard. Medtronic had a great quarter. Geoff Martha is doing a fantastic job. I thought they put everything together. They’re even getting rid of the commodity stuff. And what happens? The stock goes up and then goes back down. That’s why this market is so daunting. I like Medtronic, but I got to tell you, at 14 times earnings, I don’t know what supports it. I’d buy a little and then wait a little more till it goes down… It should be higher, but I can’t make it go higher.
Previously, Cramer called the company a “quandary.”
Cardiovascular Growth and a Higher Annual Outlook
Medtronic plc (NYSE:MDT) reported approximately $9.8 billion in revenue for its fiscal 2027 first quarter, up 13.7% on both a reported and organic basis. The quarter included an extra fiscal week, which management estimated contributed approximately $570 million to organic revenue. This calendar benefit is an important context for the headline growth rate. Cardiovascular organic revenue increased 18.9%, while Neuroscience and Medical Surgical grew 9.3% and 10.2%, respectively. Adjusted diluted earnings per share reached $1.45, compared with GAAP earnings of $1.14.
Management raised its full-year organic revenue-growth forecast to 7.25% – 7.75% from 6.75% – 7.25%. It also increased the lower end of its adjusted earnings guidance, producing a new range of $5.94 – $6.00 per share. The company is also progressing with the separation of its diabetes business. On September 14, it launched an exchange offer through which shareholders can swap Medtronic shares for MiniMed shares. The offer follows MiniMed’s March initial public offering and is intended to advance the disposal of Medtronic’s remaining ownership.
The stock’s valuation remains close to the level Cramer mentioned. Medtronic plc (NYSE:MDT) trades at approximately 14.5x its FY2027 adjusted EPS guidance midpoint, below Abbott Laboratories’ approximately 17x multiple. The comparison offers some relative valuation support, although the companies’ product mixes differ.
Medtronic isn’t the only healthcare stock hedge funds are betting on. See which of the 10 Best Healthcare Stocks you could buy according to hedge funds.
Separation Conditions and Commercial Execution Risks
The MiniMed transaction has not yet removed all uncertainty surrounding the separation. The exchange offer is scheduled to expire on October 9 unless extended or terminated, and completion depends on minimum participation and a legal opinion concerning its tax treatment. Medtronic plc (NYSE:MDT) said it would pursue additional transactions to dispose of any remaining stake if the offer closes without being fully subscribed.
The company also warned that it might not realize the separation’s anticipated benefits. Its disclosures identify competition, regulatory requirements and potential delays in developing, manufacturing and selling medical products as continuing business risks. These are relevant as the company works to sustain growth after a quarter that benefited from additional selling days.
You can also read how the stock holds up against Gilead Sciences.
Fund Ownership Broadens While Short Positions Stay Small
The number of hedge funds holding Medtronic as per Insider Monkey’s database increased to 67 in the second quarter from 60 in the first. Of those, First Eagle Investment Management had the most prominent position and increased its holding by 38% to 13.78 million shares. Other funds like Arrowstreet Capital, Citadel Investment Group, D E Shaw, and AQR Capital Management also increased their position in the quarter by 177%, 447%, 392%, and 103%, respectively. Meanwhile, short interest stood at 1.35% of the public float, showing limited short positioning.
Medtronic plc’s (NYSE:MDT) higher guidance and growth across its major businesses possibly help explain why Cramer likes the company despite the stock’s disappointing response. The extra week contributed to the quarter’s performance, and the MiniMed separation remains unfinished. His suggestion to buy a little now leaves room for those developments to play out before adding more.
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