) posted a 3.2% rise in fiscal 2014-second quarter adjusted
earnings per share to 96 cents from 93 cents a year ago, beating
the Zacks Consensus Estimate by a penny. The marginal rise in
earnings was attributable to adverse impacts from foreign
exchange movements and the medical device excise tax. Net
earnings, however, fell 2.2% to $435 million from $445 million
due to decrease in weighted average shares outstanding.
Total revenues in the first quarter grew 2.7% to $2,598 million,
missing the Zacks Consensus Estimate of $2,610 million. On a
geographic basis, revenues in the U.S. market increased 1.6% to
$1,277 million. On the other hand, revenues from non-U.S.
developed markets rose 1.8% to $938 million and from emerging
markets went up 8.8% to $383 million.
On an adjusted basis, gross profits slid 0.4% to $1,523 million,
while gross margin fell 180 basis points (bps) to 58.6% in the
quarter due to unfavorable foreign exchange movements.
Adjusted selling, general and administrative expenses, as a
percent of sales, fell 110 bps in the quarter. Research and
Development (R&D) expenses escalated 10.7% to $135 million in
the quarter, representing 5.2% of sales, up 40 bps from the
fiscal 2013-second quarter.
Adjusted operating earnings dropped 1.9% to $560 million.
Adjusted operating margin dipped 100 bps to 21.6% in the quarter.
Revenues from the
rose 4.0% (but down 2% in constant currency) to $1,213 million in
the quarter. Sales in Advanced Surgical increased, driven by
double-digit rise in vessel sealing and solid growth for
stapling. Sales of Advanced Surgical were driven by the
acquisition of Given Imaging. In General Surgical, operational
sales declined slightly from the year-ago level, due to the sale
of the Confluent bio-surgery product line in Jan 2014.
inched up 0.7% to $409 million (but down 1% in constant
currency). Sales in Peripheral Vascular increased driven by
better sales of compression products. However, Neurovascular
sales were flat year-over-year, as higher growth in the U.S. was
offset by competitive pressure in the European market, the timing
of customer orders in emerging markets and a recent voluntary
Revenues from the
Respiratory and Patient Care
rose 1.9% (down 1% in constant currency) to $976 million in the
quarter. Sales from Patient Monitoring sales rose modestly driven
by higher sales of capnography products. Sales in Airway &
Ventilation grew slightly, as moderate increase in sales of
ventilators more than offset the decrease in sales of airway
In Nursing Care, sales were higher, primarily due to increases
in sales of incontinence and enteral feeding products. Patient
Care sales moderately rose from the prior year, led by an
increase in sales of SharpSafety products on the back of
favorable pricing and a competitive shortage of pre-filled
COVIDIEN PLC (COV): Free Stock Analysis
ENZYMOTEC LTD (ENZY): Free Stock Analysis
ST JUDE MEDICAL (STJ): Free Stock Analysis
WILLIAM DEMANT (WILYY): Get Free Report
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Covidien repurchased roughly 1.2 million shares under its
previously announced share buyback program. With this, the
company has returned over $2.0 billion to shareholders over the
last twelve months through share repurchases and dividends.
Covidien reiterated its outlook for fiscal 2014. Previously,
Covidien had revealed that it expects revenues to grow 2-5% year
over year at constant exchange rate (CER) for fiscal 2014.
However, the company had updated its fiscal 2014 tax rate
guidance. Covidien expects the effective tax rate for 2014 to be
within 16.5 to 17.5%. The range included the impact of foreign
exchange at current rates and excluded the impact of one-time
Adjusted operating margin is likely to remain in the band of
21.5-22.5% while effective tax rate is expected in the range of
16.0-17.0%. Moreover, Covidien is aiming a dividend payout ratio
in excess of 35% over time and is targeting to achieve a ratio of
at least 30%.
Covidien currently carries a Zacks Rank #3 (Hold). Some
better-ranked stocks in the medical products industry include
St. Jude Medical Inc.
William Demant Holding A/S
). Enzymotec sports a Zacks Rank #1 (Strong Buy), while both St.
Jude Medical and William Demant Holding retain a Zacks Rank #2