MedTech valuations are discounted but the fundamental backdrop remains cautious, requiring selective stock picks in 2Q26

Overview

This report is a Goldman Sachs 2Q26 earnings preview and chart pack for MedTech and HCIT coverage companies. It notes that the sector faces both mixed fundamentals and valuation discounting: on the one hand, medical utilization and hospital volume conditions in the U.S. have not normalized, and product-cycle support that has recently kept growth above trend is maturing, while some companies once viewed as directional leaders are experiencing company-specific headwinds; on the other hand, most large-cap MedTech coverage stocks now trade at multiples below long-term historical averages.

Core views

The key view is to stay selective on the sector rather than broadly constructive. Goldman Sachs believes 2Q26 could improve marginally versus 1Q, but without offsetting catch-up demand. Both company and market consensus generally do not assume a clearly faster second-half end-market acceleration. Revenue-side risk is relatively limited because most companies’ guidance does not assume a large improvement; on the profit side, full-year improvement is still expected from scale and mix, but current estimates have heavier 4Q weighting, so any 2Q EPS or margin upside may be used to offset second-half ramp pressure.

Analysis framework

The report evaluates 2Q26 earnings risk-reward through comparisons of Goldman Sachs forecasts against Visible Alpha consensus, company implied guidance, weighted-average organic growth and margins, raw-material costs, year-to-date stock performance, historical valuation multiples, and company model adjustments. At the stock level, it updates assumptions on revenue, margins, EPS, and/or EBITDA using product cycles, market share, FX, costs, competition, and quarterly cadence.

Methodology notes

• Earnings forecast comparisonGSe vs Consensus

  Goldman Sachs forecasts versus consensus

  The report compares Goldman Sachs forecasts for revenue, organic growth, EPS, and EBITDA with Visible Alpha consensus to assess upside or downside versus market expectations for 2Q26 earnings.

• Valuation analysisHistorical Multiples Since 2005

  Historical multiple discount

  The report compares current P/E or EV/Sales multiples of coverage companies with peak, trough, and average values since 2005 to judge whether current valuations already reflect fundamental pressure.

• Goldman Sachs internal frameworkGS Factor Profile

  Growth, returns, valuation multiples, and composite percentile

  The Goldman Sachs Factor Profile combines forward sales growth, EBITDA growth, EPS growth, ROE, ROCE, CROCI, and valuation multiples into percentile rankings to support cross-stock comparison.

• M&A scenarioM&A Rank

  Potential take-over probability score

  Goldman Sachs uses a 1-to-3 M&A Rank to assess a company’s likelihood of being an acquisition target, where 1 means high probability, 2 means medium probability, and 3 means low probability; for some companies, target prices incorporate M&A components.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Large-cap MedTech coverage basket

  Core coverage universe

  Strengths

  Most companies currently trade below long-term averages, and full-year revenue guidance does not assume significant end-market acceleration; the near-term expectation hurdle is relatively manageable.

  Weaknesses

  Industry growth is slowing, product cycles are maturing, utilization has not normalized, and some companies face company-specific headwinds.

  Comparison

  Compared with the S&P 500, whose valuation is above historical averages, MedTech average multiples are below its own long-term average.

  Risks

  If 2H26 margins and EPS ramp are not delivered, estimates may continue to be reduced.

• ABT

  One of the exceptions where Goldman Sachs organic growth forecasts exceed consensus

  Strengths

  Delayed recovery in Libre overseas tenders, Instinct shipments to MiniMed, easing comparable base in diagnostics, and increased EP share.

  Weaknesses

  Still exposed to slowing diabetes technology end markets, competition, margin-target execution, and China VBP-related risks.

  Comparison

  The report says GSe organic growth is 60 bps above consensus.

  Risks

  NEC litigation, intensified medical device competition, FX and tariff volatility.

• ISRG

  One of the exceptions where Goldman Sachs organic growth forecasts exceed consensus

  Strengths

  Higher U.S. revenue per case and support from Sp, Ion, and haptic portfolio.

  Weaknesses

  Valuation remains elevated and results are sensitive to the pace of robotic surgery penetration.

  Comparison

  The report says GSe organic growth is 70 bps above consensus.

  Risks

  Robotic surgery penetration slower than expected, delays in DV5 rollout, competitive pressure, and tariff risk.

• MDLN

  One of the exceptions where Goldman Sachs organic growth forecasts exceed consensus

  Strengths

  Quarterly billable days and comparable base provide cyclical support.

  Weaknesses

  High spending intensity, ramp spending at new customer onboarding, quality control, and distribution network expansion may restrain margin expansion.

  Comparison

  The report says GSe organic growth is 130 bps above consensus.

  Risks

  Slower healthcare utilization, trade restrictions, supply chain disruptions, and erosion of cost-discount advantages.

• EW, OMDA, PODD

  Select stocks highlighted as having potential quarterly upside

  Strengths

  Goldman Sachs sees these names having not only possible quarterly upside but also potential benefit from improved forward-looking narratives.

  Weaknesses

  The input snippet does not fully detail each company’s specific upside drivers.

  Comparison

  Compared with the broader cautious sector view, these are more selective opportunities.

  Risks

  Product adoption, competitive intensity, margin pace, and market expectation shifts.

• ABT, MMED

  Stocks where narratives may improve in 2H26 through 2027

  Strengths

  The report sees positive inflection possibilities in forward-looking narratives.

  Weaknesses

  Still depend on product cycles, market share, and recovery in end-market demand.

  Comparison

  Compared with assets focused only on near-term quarterly upside, these are more medium-term narrative-improvement stories.

  Risks

  If macro utilization does not improve or competition intensifies, narrative improvement may be delayed.

Key data

• Report date2026-07-14The filename and disclosure date indicate July 14, 2026.
• Coverage themeMedTech & HCIT 2Q26 earnings outlookThe report title is explicitly a 2Q26 Chart Pack Preview.
• Sector viewNeutral to cautiousThe report states a neutral to cautious view on the broader macro backdrop going into earnings season.
• 2Q26 U.S. medical volume backdropImproved from prior quarter but not normalizedThe 2Q26 Hospital Due Diligence Day and Utilization Diagnostic show that U.S. volume conditions remain challenging.
• Organic growth vs consensusMost in line or slightly below; ABT +60 bps, ISRG +70 bps, MDLN +130 bpsThese above-consensus differences are mainly driven by company-specific factors.
• Large-cap MedTech historical valuationCurrent average P/E 18.9x, about 6.3x below the 25.2x average since 2005Exhibit 10 shows Medical Technology Average multiples trading at a discount to historical averages.
• S&P 500 valuation contextCurrent P/E 21.6x, about 4.8x above the historical average of 16.8xThis contrasts with the MedTech discount.
• Goldman Sachs model adjustments directionSector estimates reduced overallThe report says industry estimates were revised up and down due to updates in end-market, market share, FX, and P&L dynamics.
• Short-term rebound conditionSlightly better-than-expected results may support a short-term stock reboundSustained recovery, however, requires stronger capital allocation, expectation recalibration, and better growth-pipeline visibility.

Impact & implications

For investment implications, the valuation discount provides some margin of safety, but fundamentals are not yet strong enough to support a broad sector re-rating. The report emphasizes stock selection: in the short term, focus on companies that could beat expectations in 2Q; in the medium term, focus on names where the narrative may improve from 2H26 onward, with more aggressive capital deployment or pipeline-driven re-acceleration. If utilization does not improve, inflation pass-through continues to pressure margins, or if 2H26 ramp is too heavy, the sector could still face further estimate cuts and valuation headwinds.

Risks

• The U.S. healthcare utilization and hospital volume environment has not normalized and may drag revenue growth.
• Industry product cycles are maturing, weakening the growth support that previously was above trend.
• Inflation and raw material costs may flow into the P&L with a lag, pressuring gross margins and EPS.
• Current estimates are heavily reliant on 4Q and second-half ramping; if execution falls short, revisions downward may occur.
• Tariffs, FX volatility, China VBP, local competition, supply chain, and healthcare policy changes may impact multiple companies.
• A valuation discount does not automatically mean immediate re-rating; if capital deployment and pipeline visibility remain insufficient, sector rebounds may be only short-lived trading opportunities.

What to watch

• Whether 2Q26 organic growth improves marginally versus 1Q and whether it exceeds consensus.
• Whether companies maintain, cut, or recalibrate 2026 and longer-term revenue and margin guidance.
• Key end-market trends such as hospital volume, surgery volume, CGM, EP, TAVR, TMTT, and diabetes devices.
• Whether 2Q EPS or margin upside is used by management to offset 2H26 ramp pressure.
• How raw materials, semiconductors, freight, FX, and tariffs actually flow through to gross margins.
• Whether capital allocation becomes more active, including shareholder returns, M&A, growth-oriented cash use, and balance sheet deployment.
• Performance and narrative changes of selected names such as ABT, ISRG, MDLN, EW, OMDA, PODD, and MMED.