UBS upgrades Medtronic to Buy as cardiac growth and turnaround gains traction

UBS has upgraded Medtronic (NYSE:MDT) from Neutral to Buy, signalling that a turnaround is underway at the medical device manufacturer. The research firm highlighted the company’s fiscal 2026 results, which recorded its highest annual revenue growth in 10 years. Medtronic reported fiscal fourth-quarter revenue of $9.8 billion, an increase of 9.9 per cent as reported and 6.6 per cent organically, while full-year 2026 revenue reached $36.4 billion, up 8.4 per cent as reported.

The upgrade is underpinned by significant momentum in the cardiac segment, which UBS identified as a primary growth driver. Revenue from Cardiac Ablation Solutions surged 78 per cent globally, including a 124 per cent rise in the United States. This performance was bolstered by the successful launch of new products, including Symplicity Spyral, Hugo, Altaviva, and Stealth AXiS. Symplicity Spyral, a treatment for hypertension, is now annualising at $100 million, demonstrating the company’s ability to convert innovation into meaningful top-line contribution.

Despite the positive momentum, Medtronic faces near-term headwinds from trade policy. The company disclosed that tariffs impacted its business by $74 million in the recent quarter, representing an 80 basis point headwind. Looking ahead, Medtronic anticipates a $250 million impact on fiscal 2027 gross margins, with management noting that no refunds are assumed for these costs. Investors are advised to monitor how these tariff effects interact with the company’s guidance for fiscal 2027 organic revenue growth of 6.75 per cent to 7.25 per cent.

Broader sector dynamics also play a role in the investment thesis. BTIG recently noted a stabilisation in the MedTech sector, suggesting that market momentum may be unwinding away from semiconductors and artificial intelligence. However, Medtronic must navigate intense competition in cardiovascular devices and robotic surgery from peers such as Intuitive Surgical and Boston Scientific. Additionally, management described the U.S. Structural Heart market as softer during the quarter, partly attributing the weakness to low-risk data trends.

Operational uncertainties persist, particularly regarding the timing of the MiniMed separation. Medtronic has guided conservatively by including a full year of diabetes operations in fiscal 2027, though management remains uncertain about the separation timeline. While the upgrade reflects improved execution and product adoption, analysts caution that the sustainability of growth across the broader portfolio requires further confirmation over multiple quarters.