In a bid to focus on the core, profitable part of its business, Natus Medical Incorporated BABY recently decided to sell its wholly-owned subsidiary, Medix Medical Devices, which the company had acquired in 2010. Per this announcement, the company has signed a definitive agreement to divest Medix in an employee-led buyout.
Financial terms of the deal have been kept under wraps.
Going by the deal details, incubators, warmers and other Medix products will be divested. Under this new ownership, Medix will continue to distribute Medix products and the previously distributed line of Natus Medical products plus other third-party products in Argentina and Venezuela.
According to Natus Medical, this deal is strategically aligned with its business as apart from enabling it to refocus on the core products, this decision will permit it to plan investment in the high-growth markets.
We believe, this move is integral to the company’s recent implementation of a new organizational structure, designed to improve its operational performance.
Financial Impact of the Sell-Off
Medix recorded approximately $7.6 million of revenues in 2018 and was expected to contribute approximately $6 million to its top line in 2019.
Natus Medical projects this divestiture to be accretive to its operating margin going forward. The company expects to incur $3-$4 million of transaction and disposal expenses as part of the divestment.
The company will provide an updated full-year revenue guidance after adjusting the impact of the divestiture during first-quarter 2019 earnings release.
Organizational Restructuring at a Glance
Natus Medical is progressing well with its new organisational streamlining process wherein it is working on consolidating its three business units, namely Neuro, Newborn Care and Otometrics into “One Natus”.
Per the company, this initiative creates a single, unified entity with the globally led functional teams in Sales & Marketing, Manufacturing, R&D, Quality plus General and Administrative departments. The company claims this structure to increase transparency, efficiency and cross-functional collaboration across common technologies, processes and customer channels.
The new organization is expected to optimize Natus Medical’s proven go-to-market strategies and leverage its common engineering, operations and supply chain infrastructure.
Share Price Performance
In the past year, Natus Medical has underperformed its industry. The stock has declined 22.4% against the industry’s 12.2% rise.
Zacks Rank and Key Picks
Currently Natus Medical carries a Zacks Rank #5 (Strong Sell).
Some better-ranked stocks in the broader medical space are Stryker Corporation SYK, Penumbra, Inc. PEN and Amedisys, Inc AMED, each currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Stryker’s long-term earnings growth rate is projected at 10%
Penumbra’s long-term earnings growth rate is estimated at 20.9%.
Amedisys’s long-term earnings growth rate is forecast at 19.7%.
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