Morgan Stanley Sees Johnson & Johnson Sale Of Cordis As 'Negative' For 3 Companies

Morgan Stanley commented on Johnson & Johnson JNJ Monday following news that the company may divest itself of Cordis.

Analyst David R. Lewis felt that “a divestiture would be in-line with management’s efforts to prioritize its medical device business and focus on faster growth assets where J&J has strong competitive positioning.”

Lewis added that Cordis appeared to have experienced flat to negative growth over the past few years despite being a dominant franchise in catheters, balloons, guide wires and vascular closure devices.

The firm estimated Cordis had annual sales of approximately $850 million with margins above 20 percent but below the corporate average. Lewis saw a potential divestiture as $0.04 dilutive to 2015 EPS, “but potentially EPS neutral should J&J elect repurchase shares with the proceeds of $2 billion.”

Lewis also indicated that the rumored sale of Cordis to Cardinal Health Inc CAH could be an “incremental negative” for Boston Scientific Corporation BSX, Abbott Laboratories ABT and Medtronic PLC MDT as Cardinal may decide to compete on price.

The firm maintained an Equal-weight rating on the stock.

Johnson & Johnson recently traded at $100.37, up 0.11 percent.