Medtronic’s ambitious goal: Generate $40B in free cash flow in 5 years — 6 highlights

Spinal Tech

Here are six highlights from Medtronic's recent investor day, according to a Seeking Alpha report.

1. Medtronic's goal is to generate $40 billion in free cash flow over the next five years, with half returned to shareholders as dividends and buybacks.


2. The company will allocate $10 billion of the $40 billion in free-cash-flow to debt reduction and bolt-on mergers and acquisitions. The remaining $10 is slated for flexible options including "bolstering the company's cash position."


3. Medtronic intends to achieve mid-single digit constant currency revenue growth in the next five years, as well as double-digit constant currency EPS.


4. Every Medtronic division plans to drive innovation and new product development. While the cardiac and vascular market is expected to grow at a 4 percent CAGR, the company wants to grow at a 9 percent CAGR.


5. Medtronic is benefiting from its Covidien merger and a marginally lower tax rate from relocating headquarters from the United States to Ireland; which has resulted in a 200 to 300 bps.


6. Medtronic will likely have access to 75 percent of the ongoing free-cash flow generation by 2021.

"Medtronic has ambitious growth plans over the next five years. Personally I am skeptical all the targets can be hit," concluded the article's author.

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