Medtronic aims to achieve 80% free cash flow, return 50%+ to investors: 5 things to know on strategic growth

Spinal Tech

Medtronic unveiled its strategic growth roadmap for creating long-term shareholder value at the 2018 Medtronic Institutional Investor and Analyst Day in New York City.


"We are highly focused on creating shareholder value, and that starts with technology," said Chairman and CEO Omar Ishrak. "We are leaders in many of the fastest growth markets in our industry, and we continue to invest in the technology of tomorrow that will fuel our long-term growth. We are committed to continuous innovation to stay ahead of our competition, inventing new therapies and markets, and disrupting existing markets."

Here are five key points to the strategic growth plan:

1. Medtronic will invest in high growth markets and expects a higher weighted average market growth rate as a result. Coupled with globalization and economic value initiatives, the company expects to strengthen its growth profile and increase competitiveness.

"We have increased our focus on our core drivers, on allocating capital efficiently across our business, and on optimizing our portfolio," said CFO Karen Parkhill. "And, as we execute and deliver on growth, leverage and cash flow conversions, we expect that to result in sustainable returns and durable value for our shareholders."

2. The company's emerging market businesses are expected to continue growing, and Medtronic aims to develop new business models to realize economic value of its technology.

3. Long-term financial targets to drive sustainable growth and return include:
• Increasing operating revenue of 4 percent-plus
• Expanding underlying operating margin of 40 to 50 basis points per year through the planning period
• Growing adjusted earnings per share 8 percent over the planning period
• Achieving 80 percent free cash flow conversion over the next two to three years
• Returning a minimum of 50 percent of free cash flow to shareholders

4. Medtronic calls its initiative to leverage its global size and scale to improve productivity Enterprise Excellence; the company expects the initiative will allow it to reinvest in growth and long-term operating margin expansion.

5. According to Seeking Alpha, the company's shares were down 1 percent after Medtronic revealed its plan for growth.

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