) announced that its fully-owned subsidiary Covidien
International Finance S.A. (CIFSA) will be offering 2.950%
underwritten senior notes due 2023 for an aggregate purchase
price of $750 million.
The net proceeds will be used primarily to repay its earlier
debt of 1.875% senior notes due Jun 2013 as well as for general
corporate purposes. The offering will close on May 16, 2013.
Covidien's debt-to-capital ratio at the end of the second
quarter of fiscal 2013 was 29.4%. Moreover, net interest expenses
in the quarter were $50 million.
Covidien recently provided a dismal fiscal 2013 guidance,
which complements its Zacks Rank #5 (Strong Sell). Management
stated that the guidance was lowered due to the impact of
unfavorable currency fluctuation.
Moreover, the company's net income from continuing operations
dropped 10.2% in the last reported quarter of fiscal 2013 due to
higher expenses, which dampened solid sales growth. We are
concerned over the company's increasing expenses associated with
acquisitions, costs related to the expected divestment of
Malinckrodt and other restructuring charges. The medical device
tax is an additional burden borne by the company.
Covidien is slated to spin-off its Pharmaceutical unit at the
end of Jun 2013. The Pharma business is performing well and
contributing significantly to the top line. Following its
divestment, Covidien will be left with only the medical devices
and supplies businesses. Given the current difficult healthcare
environment, uncertainty looms over the growth prospects of these
While we strongly recommend investors to avoid this stock due
to the risks associated with the Pharma spin-off, other medical
stocks such as
) warrant a look. While Conceptus carries a Zacks Rank #1 (Strong
Buy), the other two stocks carry a Zacks Rank #2 (Buy).
ATRICURE INC (ATRC): Free Stock Analysis
COVIDIEN PLC (COV): Free Stock Analysis
CONCEPTUS INC (CPTS): Free Stock Analysis
MYRIAD GENETICS (MYGN): Free Stock Analysis
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