Medtronic’s ( MDT ) diabetes care subsidiary, MiniMed Group, has officially launched its IPO roadshow to list as an independent company on the Nasdaq. About 28 million shares of common stock will be offered to the public at an expected price range of $25 to $28 per share. The company will trade under the ticker MMED.
Medtronic will still own between 89% and 90% of the company after the IPO. The funds raised through the IPO will be used to strengthen the balance sheet as well as pay certain general expenses. Most importantly for investors, the public offering will allow investors to value Medtronic’s diabetes portfolio and the rest of the business separately as a single entity. This can unlock potentially better value in the future. While the IPO doesn’t change anything massively for the company in the short term, it’s part of a multi-year turnaround that will eventually help the company increase its focus on the top areas of the business.
Medtronic is a global medical technology company that develops and manufactures device-based therapies for more than 70 different health conditions. The company’s diabetes care business, MiniMed Group, makes continuous glucose monitors, insulin pumps, and other diabetes management devices.
MDT’s one-year performance underperformed the broader market by 4.6%. However, this trend has been seen across the healthcare sector, with the Vanguard Healthcare Index Fund ETF (VHT) delivering a return of just 7.99% during the same period. Medtronic also offers a dividend yield of 2.88%, which makes it a perfect choice for income investors who are happy to trade off performance for a dividend cushion.
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Medtronic has now been profitable for 48 consecutive years. The stock still trades at a discount to the healthcare sector, which is why dividend investors love to stock up on it. Currently, the stock’s forward P/E ratio of 23.29x represents a moderate discount to its five-year average P/E of 25.18x. This valuation is justified by slow but steady growth, with the company expecting to grow 7.95% in 2027, 7.74% in 2028 and 8.18% in 2029. A payout ratio of 50% indicates that the company should have no problem paying back its investment in terms of growth opportunities.
The company is expected to pay a dividend of $2.87 in 2026, a modest 1.4% growth. 2027 is when the higher dividend kicks in, with consensus growth of 7.7% to $3.09 a share for the 2027 fiscal year. Given that the stock is 8% below its 52-week high, investors may want to lock in the 2027 forward dividend yield at 3.15% today.
As far as MiniMed is concerned, the company has generated around 8% of the company’s revenue in FY2025. If the IPO is priced at $25, that would value the company at about 6% of Medtronic’s market cap. Considering MiniMed is currently growing faster than the parent company, the IPO looks very valuable, especially if the separation unlocks good value in the future.
Medtronic reported its Q3 earnings on February 17, comfortably beating consensus estimates. EPS of $1.36 per share narrowly beat expectations of $1.35, while revenue of $9.02 billion also beat estimates of $8.99 billion. The company’s Cardiac Unlocking Solutions business was the fastest growing segment, registering more than 80% YoY growth. For fiscal 2026, the healthcare company expects EPS between $5.62 and $5.66.
When asked about how the company can deliver growth in 2027, management pointed to improving gross margin and operating margin. There has been no significant comment from management regarding the MiniMed IPO, but that may change soon as the March 5 deadline approaches. This is when the IPO subscription period officially begins.
Wells Fargo maintained “Buy” rating on MDT stock on February 19. A day earlier, Trust lowered its stock price target from $107 to $103.
Despite 14 “strong buy” ratings from Wall Street analysts, the company also has 13 “hold” ratings, which suggests analysts are divided about the stock’s prospects. When MiniMed Group goes public, MDT may be able to focus on its higher-margin business, thus potentially improving analyst sentiment. Until then, Medtronic remains a “moderate buy” consensus.
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As of the date of publication, Gibran Kundi has no position (either directly or indirectly) in any warranty mentioned in this article. All information and data in this article is for informational purposes only. This article was originally published on Barchart.com
