Medtronic Announces Separation From Diabetes Business, CEO Says it's "In a Really Good Spot"

On Wednesday, Medtronic (NYSE:MDT) announced its intention to separate its diabetes business into a new, standalone company, to enhance focus on high-margin growth drivers for Medtronic and accelerate innovation for the new entity.

The diabetes unit, which manufactures insulin pumps and other wearable devices, has recently returned to growth after struggling for several years due to regulatory and cybersecurity concerns. Medtronic CEO Geoff Martha stated the diabetes business is 'in a really good spot right now,' with 6 consecutive quarters of double-digit growth and a robust product pipeline.

The separation is expected to be completed within 18 months and will involve a series of capital markets transactions, with a preferred path of an IPO of less than 20% of the new company, followed by a split-off of the remaining 80%. Medtronic anticipates this move to be immediately accretive to its gross margin (~0.05%), operating margin (~1%), and earnings per share. The new entity, headquartered in California, will be led by Que Dallara, who is the current head of Medtronic's diabetes unit.

While we acknowledge the potential of MDT to grow, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an AI stock that is more promising than MDT and that has 100x upside potential, check out our report about the cheapest AI stock.

READ NEXT: 30 Stocks That Should Double in 3 Years and 11 Hidden AI Stocks to Buy Right Now.

Disclosure: None. This article is originally published at Insider Monkey.