The Irish medical device maker
) revealed that it has completed the sale of its Confluent
Surgical product line to Integra LifeSciences Corporation for
roughly $235 million in cash. However, shares of the company fell
2.5% since the announcement reflecting lack of enthusiasm among
the investors regarding the news.
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The Confluent Surgical product line comprises soft tissue repair
division of COV's Medical Devices segment, which generated about
$65 million in sales in fiscal 2012. It includes product brands
such as DuraSeal, DuraSeal Exact/Xact, VascuSeal, and
As part of the deal, Covidien will also receive up to $30
million, based on the achievement of certain performance
milestones related to the transition of the Confluent Surgical
product line to Integra. With the sale, COV intends to focus on
its global strategic plans.
Although Covidien expects the transaction to be dilutive to
fiscal 2014 earnings per share, the company believes the
underlying strength of its businesses will be able to offset the
dilution. Consequently, COV believes that the sale of Confluent
Surgical product line will not have any material impact on its
guidance for fiscal 2014.
Covidien, a Zacks Rank #2 (Buy) stock, posted adjusted earnings
per share from continuing operations of 91 cents for the fourth
quarter of fiscal 2013, which beat the Zacks Consensus Estimate
by a penny. Adjusted earnings also increased 6% from 86 cents
reported in the prior-year quarter, despite headwinds from
foreign exchange movements, the medical device excise tax and
escalated investments in emerging markets.
For fiscal 2013, COV's adjusted earnings per share from
continuing operations increased 3% to $3.72, beating the Zacks
Consensus Estimate by a penny. However, net income declined 2% to
$1,600 million (or $3.40 a share) from $1,637 million (or $3.37
per share) a year ago.
Revenues in the fourth quarter grew 2% (up 5% in constant
currency) to $2,560 million, almost in line with the Zacks
Consensus Estimate of $2,561 million. On a geographic basis,
revenues in the U.S. market decreased 2% to $1,295 million. On
the other hand, international revenues climbed 8% (13% in
constant currency) to $1,265 million, driven by emerging market
For fiscal 2013, revenues grew 4% to $10,235 million, roughly in
line with the Zacks Consensus Estimate of $10,238 million. On
constant currency basis, revenues increased 6%.
For fiscal 2014, Covidien expects revenues to grow 2-5% year over
year at constant exchange rate (CER). Revenues for the core
Medical Devices segment is anticipated to grow in the range of
2-5%, while the same for the smaller Medical Supplies business is
likely to remain flat in the fiscal year.
Moving ahead, adjusted operating margin is likely to remain in
the band of 21.5-22.5% and effective tax rate in the range of
16.0-17.0%. Moreover, COV is aiming a dividend payout ratio in
excess of 35% over time and is targeting to achieve a ratio of at
least 30% within the next 12 months.
Some other players in the medical products sector include
Cardiovascular Systems Inc.
). NuVasive carries a Zacks Rank #1 (Strong Buy), while
both Advaxis and Cardiovascular Systems carry a Zacks Rank #2