Covidien's fiscal 2014-third quarter adjusted EPS rose 14.3% to
$1.04, beating the Zacks Consensus Estimate by $0.04. Revenues
increased 4.3% to $2,688 million but marginally missed the Zacks
Consensus Estimate of $2,690 million. Covidien is poised to grow on
the back of new products, strategic acquisitions along with
expansion into emerging markets. Moreover, its recent takeover by
Medtronic is expected to generate significant synergies going
forward. However, the company faces stiff competition and remains
exposed to pricing and utilization headwinds in certain end
markets. As a result, we reiterate our Neutral recommendation and
set a target of $96.00.
Covidien plc. (COV), based in Dublin, Ireland, is a global
leader in the development, manufacture, and distribution of medical
devices and supplies, diagnostic imaging agents, and other health
care products through its subsidiaries for use in clinical and home
settings across the U.S. and international markets. The company was
incorporated in 2000 as a fully-owned subsidiary of manufacturing
conglomerate Tyco International Ltd. Covidien spun off from Tyco
International in Jun 2007 to become a public company.
On Jun 30, 2013, Covidien separated its Pharmaceuticals business
(Mallinckrodt) into a standalone company to become a core developer
of medical devices. Mallinckrodt started to trade independently on
the New York Stock Exchange (NYSE) from Jul 1, under the ticker
symbol "MNK". Meanwhile, Covidien will continue to trade with the
same ticker symbol "COV". Shareholders received 1 ordinary share of
Malinckrodt in lieu of every 8 ordinary shares of Covidien.
Covidien has two operating segments Medical Devices (roughly 85%
of total sales in the first nine months of fiscal 2014) and Medical
Supplies (15%). The company serves customers across 140 countries
and markets its products to hospitals, surgi-centers, long-term
care facilities and imaging centers and throughout the world.
The Medical Devices segment develops and markets a broad
spectrum of endomechanical instruments (including laparoscopic
instrument and surgical staplers), soft tissue repair products
(including for sutures, mesh and hernia repair), energy-based
instruments such as vessel sealing and ablation products, pulse
oximeters and monitors, airway and ventilation products, vascular
compression devices, needles and syringes, sharp safety products
and other medical device products. The division offers products to
physicians, nurses, materials managers, group purchasing
organizations and governmental health care authorities.
In an effort to expand its Medical Devices segment, the company
acquired a number of entities. Recently, in Jan 2013, Covidien
completed the acquisition of Fremont, Calif.-based medical device
company, CV Ingenuity to expand its Vascular business. CV Ingenuity
specializes in the production of devices used for the treatment of
peripheral arterial disease (PAD). Its product offerings are
utilized to heal natural vessels, clear vascular blockages and
prevent restenosis. The company's key product, a Drug Coated
Balloon (DCB) platform with a unique tunable rapid-release system,
is still in the investigational phase. Further, in Feb, 2013,
Covidien acquired Nfocus Neuromedical, Inc. (Nfocus) for $72
million to expand its vascular product portfolio.
The Medical Supplies segment offers nursing care products,
including incontinence and wound care products medical surgical
products, such as operating room supply products and related
accessories, electrodes, and chart paper product lines SharpSafety
Products including needles, syringes and sharps disposal products
original equipment manufacturer (OEM) products, which include
medical supplies, such as needles and syringes.
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