Back to top

Analyst Blog

Of late, MedTech giant Medtronic Inc. (MDT - Analyst Report) announced its intention to make a strategic shift from a device manufacturer to a provider of broader healthcare services and solutions, with meaningful clinical and economic values. As a part of this plan, the company recently formed a hospital solutions business to develop strategic partnerships with hospitals, in order to increase operational efficiencies while minimizing costs.

At the beginning, this Medtronic Hospital Solutions will focus on European catheterization laboratory (cath lab) facilities so as to increase efficiencies, especially in critical areas of hospital cardiology departments. In this regard, the first two long-term tenders of the company’s Hospital Solutions business have been offered to two leading hospitals in Europe. Under these tenders, Medtronic will administer four University Hospital of South Manchester (UHSM) NHS Trust cath labs at Wythenshawe Hospital and five Imperial College Healthcare cath labs based at Hammersmith Hospital.

In order to further its efforts, the company also purchased a 30% equity stake in NGC Medical SpA (NGC) that manages outsourced cath labs in Italy. Per the agreement, Medtronic will help expand NGC’s business outside Italy. According to the company, this investment will remain neutral to Medtronic’s fiscal 2014 earnings and will also be consistent with its disciplined focus on long-term returns.

Medtronic is confident about the success of its newly evolving role. The MedTech industry is currently plagued by several issues, including pricing concerns, hospital admission and procedural volume pressure, Medicare reimbursement issues, and regulatory overhang. Thus these efforts are expected to help the company to harness its strengths and diversify offerings.

We note that, as an opening move in this broader direction, on Aug 12, the company acquired privately-held Cardiocom, a provider of integrated tele-health and patient services for chronic disease management, for a total consideration of $200 million.

We are impressed with Medtronic’s decision to diversify its business in order to cope with the dynamic medical and healthcare market. Further, the strong guidance for the ongoing fiscal boosts confidence. The company’s focus on portfolio expansion to drive revenues from emerging markets appears impressive.

Medtronic currently carries a Zacks Rank #3 (Hold). Other medical sector stocks that warrant a look are Alere Inc. (ALR - Snapshot Report) and Affymetrix Inc. (AFFX - Analyst Report). These stocks carry a Zacks Rank #1 (Strong Buy). Medtronic’s major peer in the medical device set, St. Jude Medical (STJ - Analyst Report), currently holding a Zacks Rank #2 (Buy), also looks attractive.

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
RPC INC RES 24.91 +8.35%
LITHIA MOTO… LAD 94.59 +4.60%
DELTA AIR L… DAL 39.15 +3.90%
FLAMEL TECH… FLML 14.51 +3.50%
SOUTHWEST A… LUV 28.87 +2.92%