U.S. Markets closed

Morgan Stanley: Medtronic's $4B Financing Could Be 10-Cent EPS Tailwind

Dave Royse

Medtronic PLC (NYSE: MDT)’s announcement that it is commencing an offer for more than $4 billion in debt securities should help the company manage its tax headwind, according to Morgan Stanley. 

The Analyst

David Lewis maintained an Equal-weight rating on Medtronic with a $100 price target.

The Thesis

Medtronic announced Monday that it will commence an offer for up to $4.175 billion in outstanding debt securities; Lewis said the offer should be leverage neutral. (See his track record here.)

The financing could amount to as much as a 10-cent tailwind to EPS in fiscal 2020, or nearly 2% EPS growth if the company is able to complete the tender for the full amount, the analyst said. 

The medical device company's most recent guidance included $200 million to $210 million in quarterly interest expenses, Lewis said. The offer could bring interest below $175 million, boosting Medtronic's EPS, he said. 

“Management could also selectively reinvest some of these savings," the analyst said. 

Price Action

Medtronic shares were down 0.16% at $98.95 late in Tuesday's session. 

Related Links:

Wells Fargo: Medtronic An Accelerating Growth Story Trading At A Discount

The Daily Biotech Pulse: Breakthrough Therapy Designation For Iovance, Guardant Prices Offering, 2 Stocks to Debut

Photo courtesy of Medtronic. 

Latest Ratings for MDT

Date Firm Action From To
Jun 2019 Upgrades Market Perform Outperform
Apr 2019 Maintains Market Perform Market Perform
Feb 2019 Maintains Neutral Neutral

View More Analyst Ratings for MDT
View the Latest Analyst Ratings

See more from Benzinga

© 2019 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.