Medtronic (MDT +1.44%) and Intuitive Surgical (ISRG +1.36%), two medical device leaders, haven't performed well this year. While weakness in the broader healthcare sector hasn't helped, they have both encountered company-specific issues that have contributed to their lagging the market. The good news is that there are solid reasons to think they can bounce back, but which one should investors consider right now?
Image source: Getty Images.
What's going on with Medtronic?
Medtronic has many qualities: A large medical device business with dozens of products across several therapeutic areas. The company has a deep footprint in the healthcare sector, a strong reputation, and it records consistent revenue and earnings. However, its most recent financial results have been mixed. In the fourth quarter of its fiscal year 2026, which ended on April 24, Medtronic's revenue increased by 9.9% to $9.8 billion. The company's adjusted earnings per share (EPS) were $1.55, a 4.3% decline due to higher costs from multiple sources, including tariffs.
Worse, the company's guidance for the next fiscal year fell short of analysts' expectations, sending the stock lower following its earnings release. Still, there are several things to be excited about. Medtronic posted its highest annual revenue growth in a decade during its last fiscal year.
NYSE: MDT
Key Data Points
It has addressed some of the top-line growth concerns investors had, partly thanks to its Pulse Field Ablation franchise. Further, the company launched new products that should eventually contribute to sales growth. Last year, Medtronic announced that the U.S. Food and Drug Administration had cleared its Hugo robotic-assisted surgery (RAS) system for urologic procedures, putting it in direct competition with Intuitive Surgical.
The RAS market is underpenetrated, and as Medtronic earns more indications for the Hugo system, it should eventually meaningfully impact its financial results. We could also see improved margins once it completes the spin-off of its lower-margin diabetes care division. Lastly, Medtronic is a phenomenal dividend stock, offering a forward yield of 3.4% and having increased its payouts for 49 consecutive years. It is a great pick for income-seeking investors.
Can Intuitive Surgical overcome its challenges?
Intuitive Surgical is dealing with tariffs, increased competition from Medtronic and Johnson & Johnson (JNJ +0.88%), and lower margins associated with its latest launch, the da Vinci 5 surgical system. The company's financial results look strong regardless. In the second quarter, Intuitive Surgical's revenue increased by 19% year over year to $2.89 billion, while its adjusted EPS came in at $2.80, 28% higher than the year-ago period. But many investors are wondering whether they should pay a premium for a company with growing challenges, including competition.
NASDAQ: ISRG
Key Data Points
Intuitive Surgical trades at 34.1x forward earnings, well above the 18.5x average for healthcare stocks. Still, there are reasons to be optimistic. Intuitive Surgical's da Vinci 5 will continue to earn additional indications. Given its greater computing power than previous versions, and built-in architecture for data analytics and AI-powered features, this new machine may significantly expand the RAS market.
It is already boosting Intuitive Surgical's installed base. The more devices it places, the more recurring revenue the company generates from instruments and accessories. The da Vinci 5's innovative features can also help Intuitive Surgical stay ahead of the competition, and that's before we mention the company's massive lead in this area. It launched its first RAS device more than 25 years ago and has built a reputation ever since. All of those factors put Intuitive Surgical in a strong position to capitalize on the growing RAS industry.
Which is the better buy?
Medtronic is trading at 14.3x forward earnings. Its lower multiple makes sense, considering Intuitive Surgical typically grows its revenue and earnings faster. The market is valuing these two differently because they are different. One is a mature, consistent business with fairly low revenue and earnings growth, while the other is arguably still in the growth stage. Also, one pays a dividend -- and boasts an impressive streak of consecutive payout growth -- and the other one doesn't.
In other words, these two stocks will appeal to investors with different goals. Those looking for reliable income payers should opt for Medtronic. The company will be the less volatile of the two moving forward and could help stabilize a well-diversified portfolio during challenging times. Growth-oriented investors might want to pick Intuitive Surgical. They should expect bigger price swings, but Intuitive will likely deliver stronger returns over the long run.
