) posted a 14.3% rise in fiscal 2014-third quarter adjusted
earnings per share to $1.04 from 91 cents a year ago, beating the
Zacks Consensus Estimate by 4 cents. Net earnings rose 11.0% to
$474 million from $427 million.
However, reported earnings per share fell 21.2% to 67 cents from 85
cents in the fiscal 2013-quarter while reported net earnings dipped
23.5% to $306 million from $400 million a year ago.
Total revenues in the quarter grew 4.3% to $2,688 million,
marginally missing the Zacks Consensus Estimate of $2,690 million.
On a geographic basis, revenues in the U.S. market increased 3.2%
to $1,325 million. On the other hand, revenues from non-U.S.
developed markets rose 4.2% to $948 million and from emerging
markets went up 8.1% to $415 million.
Expenses and Margins
On an adjusted basis, gross profits inched up 4.2% to $1,598
million, while gross margin slid 100 basis points (bps) to 59.4% in
Adjusted selling, general and administrative expenses, as a percent
of sales, fell 130 bps in the quarter due to productivity
improvements, partially offset by higher expenses resulting from
acquisitions and spending on growth initiatives.
Research and Development (R&D) expenses escalated 6.2% to $137
million, or 5.1% of sales, in the quarter from $129 million, or
5.0% of sales, in the year-ago quarter.
Adjusted operating earnings upped 9.9% to $609 million. Adjusted
operating margin rose 120 bps to 22.7% in the quarter.
segment rose 5.2% to $2,302 million (accounting for 85.6% of total
revenues) from $2,189 million in the year-ago quarter. However,
U.S. Medical Supplies
segment went down nearly 1.0% to $386 million (accounting for 14.4%
of total revenues) from $389 million in the fiscal 2013-third
Product Group Results
Revenues from the
rose 7.6% (up 1% in constant currency) to $1,305 million in the
quarter, mainly driven by a 12.8% rise in Advanced Surgical sales.
Operational sales rose 7%, as foreign exchange rate movement
boosted the quarterly sales growth by one percentage point.
Advanced Surgical sales were largely boosted by the acquisition of
Given Imaging. Further, Covidien's BÂRRX gastrointestinal sales
grew more than 20%, as did the company's interventional lung
business sales. These apart, vessel sealing and synthetic mesh both
recorded double-digit rise in sales during the quarter.
In General Surgical, operational sales declined 3.0% due to sale of
the Confluent biosurgery product line in January 2014, partially
offset by the impact of the New Wave Surgical acquisition.
were flat at $417 million driven by flat Peripheral Vascular and
Neurovascular sales. Sales were flat in Peripheral Vascular
business because increases in sales of chronic venous insufficiency
and procedural support products were offset by decreases in sales
of compression and dialysis products and by the impact of the
company's exit from the renal denervation market. Neurovascular
sales were flat, as sales growth of flow diversion products were
offset by lower sales of access delivery products.
Revenues from the
Respiratory and Patient Care
rose 1.9% to $966 million in the quarter. Patient Monitoring sales
grew 6% in the quarter driven by higher sales of capnography
products, which continued to grow above 30%. Airway &
Ventilation sales grew slightly during the quarter driven by higher
sales of ventilators. Patient Care sales increased due to higher
sales of SharpSafety products, primarily resulting from the
continued impact of favorable pricing and a competitive shortage of
pre-filled syringes. Nursing Care sales fell marginally, mainly due
to lower sales of enteral feeding products.
In early June, medical technology giant, Medtronic Inc. (
) announced its plans to acquire Covidien for $42.9 billion.
Medtronic's rationale behind the merger is to offset the impact of
high U.S. corporate tax rate by shifting its tax base overseas, to
Ireland. Subject to certain customary conditions, the acquisition
is expected to close in the fourth quarter of 2014 or early 2015.
Post-merger, the combined entity will be known as Medtronic plc and
will boast a comprehensive product portfolio, a diversified growth
profile and broad geographic reach. On successful completion of the
transaction, Medtronic plc is expected to report at least $850
million of annual pre-tax cost synergies by the end of fiscal 2018.
Covidien currently carries a Zacks Rank #4 (Sell). Some
better-ranked stocks in the medical products industry include Alere
) and St. Jude Medical Inc. (
), both with a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research?
Today, you can download 7 Best Stocks for the Next 30 Days.
Click to get this free report
COVIDIEN PLC (COV): Free Stock Analysis Report
MEDTRONIC (MDT): Free Stock Analysis Report
ST JUDE MEDICAL (STJ): Free Stock Analysis
ALERE INC (ALR): Free Stock Analysis Report
To read this article on Zacks.com click here.