Shares in medical device maker Medtronic (MDT) dropped today on reports that it is considering separating its diabetes business into a standalone publicly traded company.
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Quick Separation
Medtronic stock was down 0.4% as a Wall Street Journal report stated that the separation could happen within the next 18 months.
The diabetes business, yet to be named, will be listed and led by Que Dallara who currently heads the diabetes division. The diabetes arm generated nearly $2.5 billion in sales for the year ending April 2024, which was up 10% on the previous year.
According to the Pan American Health Organization 62 million adults and children live with the condition with that number expected to rise to 109 million by 2040. That’s due to unhealthy lifestyles and an increase in obesity.
Boost for Other Divisions
Medtronic believes that its diabetes division can better grow to help people with the condition as a separate business. Its diabetes products are sold directly to patients and include wearable and disposable devices.
It will also help it to grow its other divisions in more profitable sectors such as neuroscience, cardiovascular diseases and medical surgery. Its products in those divisions are sold to hospitals and physicians.
The news comes ahead of Medtronic’s Q4 earnings this week. Wall Street expects Medtronic to report adjusted earnings per share of $1.58 alongside revenue of $8.81 billion. This would represent year-over-year increases of 8.2% for EPS and 2.6% for revenue.
Is MDT a Good Stock to Buy Now?
On TipRanks, MDT has a Moderate Buy consensus based on 7 Buy and 7 Hold ratings. Its highest price target is $109. MDT stock’s consensus price target is $96.38 implying an 11.59% upside.
