) hit a new 52-week high of $73.39 in mid-day trading on Mar 28
eventually closing at $72.50. In fact, shares of this
Ireland-based medical products company have been gaining momentum
since it reported better-than-expected fiscal first-quarter 2014
results on Jan 24.
Year to date, the company's share price has recorded a healthy
return of 22.8%. The company's long-term estimated EPS growth
rate is pegged at 10.2%. Alongside, in the fiscal first quarter,
Covidien repurchased approximately 4.5 million ordinary shares,
under the company's previously announced share buyback program.
Strong First-Quarter Performance
Covidien posted strong fiscal first-quarter results recording
year-over-year increases both in revenues and adjusted earnings.
Adjusted earnings per share were $1.00 in the quarter, beating
the Zacks Consensus Estimate of 94 cents by 6.4%. Earnings also
grew 3% year over year, driven by solid top-line growth, despite
the unfavorable foreign exchange impact, the medical device tax
and incremental investments in emerging markets.
Revenues grossed $2.64 billion, up 2.8% year over year, beating
the Zacks Consensus Estimate by 1.4%. On a geographical basis,
sales growth was impressive in the developed markets,
particularly in the U.S. and Europe. Management considers this as
a sign of improved market conditions and expects this momentum to
continue for the rest of 2014. Organic sales growth also
increased in the quarter by 5%.
On a segment basis, sales at Surgical Solutions increased 5.6%
year over year to $1.26 billion. Operationally, higher sales were
reported at Advanced Surgical, owing to double-digit quarterly
sales growth of vessel sealing products and impressive gains from
stapling products. Further, sales from Vascular Therapies grew
2.2% year over year to $425 million on the back of growth in
chronic venous insufficiency products.
Sequentially, Covidien's adjusted gross margin improved 120 basis
points (bps) primarily due to better manufacturing performance by
the company's U.S. Medical Supplies business. In the first
quarter, research and development (R&D) expenses grew 40 bps
from the year-ago level, reflecting management's incremental
investments in R&D to support future growth.
Subsequent to the earnings release, most of the earnings
estimates were revised upward for fiscal 2014 and 2015. Over the
last 90 days, the Zacks Consensus Estimate has risen 0.75% to
$4.02 for fiscal 2014 and 1.4% to $4.49 for fiscal 2015.
Other Stocks to Consider
Covidien currently carries a Zacks Rank #3 (Hold). Other stocks
worth a look in the medical industry are
Meridian Bioscience, Inc.
). While Enzymotec carries a Zacks Rank #1 (Strong Buy),
SurModics and Meridian carry a Zacks Rank #2 (Buy).
COVIDIEN PLC (COV): Free Stock Analysis
ENZYMOTEC LTD (ENZY): Free Stock Analysis
SURMODICS (SRDX): Free Stock Analysis Report
MERIDIAN BIOSCI (VIVO): Free Stock Analysis
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