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

Medtronic PLC 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. 

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Photo courtesy of Medtronic.