Covidien plc
(
COV
), a large-cap medical technology company, reported its adjusted
earnings per share (from continuing operations) of $1.05 for the
second quarter of 2012, 2 cents above the Zacks Consensus Estimate
and 12 cents higher than the year-ago quarter earnings. Adjusted
earnings exclude one-time items and extraordinary charges.
Profits from continuing operations increased 7% to $491 million
(or $1.01 a share). The company repurchased roughly 2.9 million
shares in the quarter.
Revenue
Revenues for the second quarter of 2012 rose 5% year over year
to $2,946 million, beating the Zacks Consensus Estimate of $2,894
million. Currency exchange rate negatively impacted quarterly
revenue by 1%.
On a geographic basis, revenues in the U.S. and international
markets rose 5% each to $1,631 million and $1,315 million,
respectively.
Segment Analysis
Revenues from the larger Medical Devices segment climbed 7% year
over year to $2,004 million, driven by double-digit growth across
Vascular and Energy Devices product lines. New products and higher
volume contributed to growth.
Within Medical Devices, revenues from Endomechanical Instruments
increased 4% to $577 million helped by stapling products (including
Tri-Staple). Revenues from Energy Devices soared 12% to $318
million boosted by strong vessel sealing sales. Sales of Soft
Tissue Repair products inched up 1% to $222 million, as growth in
the suture unit was partially masked by lower biosurgery and
fixation sales.
Revenues from Oximetry and Monitoring sub-segment rose 4% to
$220 million driven by higher sales of monitors. Vascular product
sales jumped 17% to $390 million, backed by healthy growth across
peripheral vascular, venous insufficiency and neurovascular
offerings. However, sales of Airway & Ventilation sub-segment
remained flat year over year at $185 million, as higher sales of
airway products were offset by lower ventilator sales.
Revenues from Covidien's Pharma segment rose 4% to $508 million.
This growth was primarily fueled by robust gains in the Specialty
Pharmaceuticals and Radiopharmaceuticals
businesses.
Specialty Pharmaceuticals sales surged 34% to $142 million
spurred by solid revenue from generic product and higher sales of
branded offerings in the quarter. However, Active Pharmaceutical
Ingredients and Contrast Product sales dropped 6% and 12% due to
lower narcotics sales and sluggish U.S. markets, respectively.
Revenues from Radiopharmaceuticals increased 7% on the back of
healthy generator sales.
Sales from Medical Supplies segment were virtually flat year
over year at $434 million in the second quarter as higher sales of
medical surgical and Original Equipment Manufacturer ("OEM")
products were offset by lower revenues from SharpSafety and nursing
offerings.
Margins
Gross margin improved to 57.9% in the second quarter from 57% in
the year-ago comparable period. On an adjusted basis, gross margin
increased to 58.1% from 57.3% in the prior year-quarter. The
improvement was attributable to lower manufacturing costs and a
favorable mix. Adjusted operating margin stood at 22.1% compared
with 22.2% a year ago.
The company plans to expand in emerging markets and hence it has
increased its selling, general and administrative (SG&A) and
research and development (R&D) spending. Selling, general and
administrative expenses were higher at 31% of sales in the second
quarter of 2012 compared with 30.5% of sales in the year-ago
quarter. R&D expense spiked to 5.7% of revenues versus 4.6% in
the prior year period.
Covidien is a leading global health care products company with a
rich history of developing high-quality products in a
cost-effective manner. It competes with
Johnson & Johnson
(
JNJ
),
Becton Dickinson
(
BDX
) and
C.R. Bard
(
BCR
), 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. It has launched 100 new products over the last five
years and is on track to introduce another 50 products over the
next two years.
However, sustained pricing/procedure volume pressure represents
a headwind. We are currently Neutral on the stock, supported by a
short-term Zacks #3 Rank (Hold).
BARD C R INC (
BCR
): Free Stock Analysis Report
BECTON DICKINSO (
BDX
): Free Stock Analysis Report
COVIDIEN PLC (
COV
): Free Stock Analysis Report
JOHNSON & JOHNS (
JNJ
): Free Stock Analysis Report
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