) tried to soothe investors again by revealing that it would
reduce costs by outsourcing services to low-cost regions and
consolidating manufacturing and distribution centers.
However, the news failed to impress investors as depicted by a
0.7% fall in stock at the beginning of the week. Investors'
confidence seems to have taken a back seat given the delay in
realizing savings from the restructuring actions.
Covidien expects to generate savings of $250 million to $300
million annually from the cost reduction measures from the
beginning of fiscal 2014. Savings are expected to accelerate in
COV anticipates the majority of the restructuring measures to be
completed by the end of fiscal 2018. The company expects to incur
charges of $350 million-$450 million due to the restructuring,
mostly by the end of fiscal 2018.
Recently, the manufacturer of medical devices and supplies has
declared a 23% rise in dividend to 32 cents from 26 cents per
share, which is payable on Nov 5 to shareholders of record as on
Oct 10, 2013.
Covidien follows a policy of continuous rise in dividends in
order to soothe its investors. The company raised its quarterly
dividend by 15.6% to 26 cents per share for fiscal 2013 from 22.5
cents in fiscal 2012.
The recent raise in dividend push the annualized dividend payment
by 23.1% to $1.28 per share from $1.04 in fiscal 2013. COV plans
to make its dividend payments to be at least 35% of its adjusted
earnings per share. This means an annual dividend of $1.49 or 37
cents per quarter given its 2012-adjusted earnings of $4.26 per
Covidien posted flat adjusted earnings per share from continuing
operations of 91 cents for the third quarter of fiscal 2013, on a
year over year basis. However, earnings beat the Zacks Consensus
Estimate by a penny.
Revenues in the quarter increased 3% (up 5% in constant currency)
to $2,578 million, driven by higher sales in the Medical Devices
segment. Revenues were slightly below the Zacks Consensus
Estimate of $2,587 million.
Currently, COV carries a Zacks Rank #3 (Hold). While we remain on
the sidelines regarding the company, other companies that are
performing well include
), with a Zacks Rank #1 (Strong Buy), and
Boston Scientific Corp.
), both with a Zacks Rank #2 (Buy).
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