By Sam Boughedda
Medtronic (NYSE:MDT) announced Monday that it intends to separate its combined Patient Monitoring and Respiratory Interventions businesses, which are part of the company's Medical Surgical Portfolio.
"We are executing on our portfolio management strategy, taking action to create value for Medtronic and our shareholders. This separation will allow Medtronic to focus our company and our capital on opportunities better aligned with our long-term strategies to accelerate innovation-driven growth, and will position NewCo to unlock value," commented Geoff Martha, chairman and CEO of Medtronic.
Following the announcement, RBC Capital analysts, who have an Outperform rating and a $110 per share price target on the stock, said Medtronic's strategic portfolio review is an "ongoing process with a focus on building ecosystems across its portfolio, which appears to be a significant driver of the company's decision to divest or acquire."
"While this transaction is likely to have only a modest impact to MDT's revenue or margin profile (tens of basis of points), it should allow for better internal resource allocation and focus to help the company deliver on its targets more consistently," wrote the analysts.
Elsewhere, Stifel analysts, who have a Buy rating on Medtronic shares, said the firm's initial reaction to the news is positive.
"This represents another positive step forward for Medtronic's rethinking and reconsidering how best to drive its 5%+ top-line growth and 8%+ bottom line performance goals," wrote the analysts. "Medtronic clearly has decided the two businesses require greater internal investment than others to drive market leadership/share gain. Said differently, we strongly suspect that CEO Martha sees better and more-winnable growth opportunities elsewhere in his portfolio."