At a recent investor's meet, leading health care products
) provided its guidance for fiscal 2013 and disclosed future
strategies to drive long-term growth. José (Joe) E. Almeida, the
Chairman, President and CEO of Covidien, discussed upcoming product
pipelines and latest achievements of the company.
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The Chairman said that the company is performing consistently in
fiscal 2012, despite the current macroeconomic challenges in the
medical devices sector. He also added that the company will return
half of its free cash flow to stakeholders via share repurchases
and dividends and utilize the rest for business expansion.
Moreover, the previously announced Pharma spin-off process is
progressing smoothly and is expected to be complete by mid 2013.
For fiscal 2013, Covidien expects net revenues to grow by 3% to 6%
year over year. The company's core Medical Devices segment is
expected to be up 4%-7%. The Pharmaceuticals division is
anticipated to grow 1% to 4%, while the Medical Supplies business
is expected to remain flat year over year. All of the above
mentioned growth rates are based on current foreign exchange rates.
The guidance provided for fiscal 2013 is in line with our
expectations, reflecting the company's successful performance based
on product innovations and successful penetration into key emerging
Additionally, management forecasts adjusted operating margin in the
range of 22% to 23% and effective tax rate in the band of 18% and
19% for fiscal 2013. This implies that the company does not expect
adjusted operating margin to improve year over year, as it is the
same for fiscal 2012, while the effective tax rate is anticipated
to increase marginally.
Covidien is a leading developer, manufacturer and distributor of
medical devices and services on a global scale. Its business
segments overlap with the business of its competitors such as
Becton, Dickinson and Company
Johnson and Johnson
CR Bard Inc.
) among others.
Covidien remains committed to rolling out new products and
technologies, focusing on emerging markets, and boosting market
share in core segments through investments in sales and marketing
infrastructure. Management expects that a focus on product
innovation, aggressive portfolio management and optimal spending on
future investments will yield positive results in the long run.
However, sustained pricing/procedure volume pressure, fluctuating
foreign exchange rates, a sluggish U.S. and European economy
represent major headwinds. We currently have a Neutral
recommendation on Covidien, which carries a short-term Zacks #4
Rank (Sell rating).