RBC Capital Markets on Wednesday told clients that Medline's earnings rebound is more likely to arrive in 2028 than in 2027, as the medical supplies maker pours money into automation and platform upgrades this year.
The bank still expects Medline to deliver high-single-digit to double-digit sales growth, but it now calls 2027 an “investment year” — a period when spending on automation and systems will weigh on profits even as revenue climbs. RBC raised its 2027 revenue forecast to $33.9 billion from $33.5 billion, but trimmed its 2027 adjusted diluted earnings per share estimate to $1.46 from $1.47.
The core bet is that the heavy spending eventually creates operating leverage — the point where each additional dollar of sales translates into faster profit growth. RBC believes that inflection shows up in 2028, not 2027. Until then, the bank says share buybacks or acquisitions could help “bridge” the gap for investors.
What is Medline and why does this matter?
Medline is a major manufacturer and distributor of medical supplies, ranging from gloves and gowns to surgical instruments and hospital equipment. It serves hospitals, clinics, and other healthcare providers, making its performance a bellwether for demand in the healthcare supply chain.
The company has been investing heavily in automation and digital platforms to modernize its operations. These projects are meant to improve efficiency and cut costs over the long run, but they require significant upfront spending. That is why RBC sees 2027 as a year of investment rather than profit growth.
RBC kept its outperform rating and a $46 price target on the stock, which was recently trading around $41.98. The gap between the current price and the target suggests the bank sees meaningful upside — but only if the 2028 margin story plays out.
What it means for investors
Keeping a $46 price target while trimming a near-term profit forecast is a clear signal that RBC is not valuing Medline on what it earns in 2027. Instead, the bank is asking investors to look through a profit lull and focus on whether the automation and platform work shows up as stronger margins in 2028.
That kind of “out-year” thinking can make a stock's valuation more sensitive to evidence. Updates on project timing, early signs of margin improvement, and whether costs actually fade will all matter more than the one-cent change in the 2027 EPS estimate.
Buybacks matter for the same reason. If Medline reduces its share count, earnings per share can hold up better even while total profit is pressured by investment spending — but only if management follows through. Investors will be watching for any signs that the company is actually repurchasing shares or making acquisitions that could support the stock in the meantime.
For everyday investors, the key takeaway is that Medline's stock price is now tied to a promise of future profitability, not current earnings. That makes it more vulnerable to disappointment if the 2028 margin ramp slips, but also offers upside if the investments pay off as planned.
RBC's view echoes a broader theme in markets right now: companies that invest heavily in automation and technology are often rewarded by investors who are willing to wait for the payoff. Similar dynamics are playing out in other sectors, as seen in AI stocks rebounding on optimism and copper rebounding on AI demand.
But the wait can be long. As Ryanair's fare rebound may not cover 2028 fuel costs, some companies face headwinds that stretch years into the future. For Medline, the question is whether its automation bet will deliver the operating leverage RBC expects by 2028.
Until then, investors will be watching for quarterly updates on project timing, margin trends, and any buyback activity. Small estimate tweaks like a one-cent change may matter less than proof that the 2028 margin ramp is on track.
