Covidien plc. 's ( COV ) adjusted earnings
per share (EPS) from continuing operations of $1.12 for the second
quarter of fiscal 2013 beat the Zacks Consensus Estimate of $1.10
by 1.8%. It exceeded the year-ago EPS by 6.7%.COVIDIEN PLC (COV): Free Stock Analysis ReportEXACTECH INC (EXAC): Free Stock Analysis ReportNUVASIVE INC (NUVA): Free Stock Analysis ReportPERRIGO COMPANY (PRGO): Free Stock Analysis
ReportTo read this article on Zacks.com click here.Zacks Investment
Adjusted earnings exclude one-time items such as tax-related
expenses, restructuring and acquisition related charges along with
extraordinary expenses associated with the divestment of the
For the quarter under review, net income from continuing
operations (as reported) dropped 10.2% to $441 million (or 93 cents
a share) due to higher expenses, which dampened solid sales
Covidien's core Medical Devices is growing at a healthy pace,
particularly in certain key categories. Moreover, the company is
gaining considerable traction in emerging markets, led by its
portfolio reshaping initiatives toward high-growth/high-margin
businesses. The company remains on track to spin off its
Pharmaceutical business by mid-2013.
Revenues for the second quarter of 2013 increased 5% year over
year (up 7% in constant currency) to $3,103 million, boosted by
higher sales in the Medical Devices segment. Sales were slightly
ahead of the Zacks Consensus Estimate of $3,100 million.
On a geographic basis, revenues in the U.S. market increased 5% to
$1,713 million. International sales grew 6% (up 9% in constant
currency) to $1,390 million, driven by emerging market
Revenues from the larger Medical Devices segment increased 4% (up
6% in constant currency) year over year to $2,091 million. The
division is benefiting from new product offerings and higher
Within Medical Devices, revenues from Endomechanical Instruments
climbed 4% to $602 million, led by solid gains from Tri-Staple
reloads. Sales of Soft Tissue Repair products remained flat at $222
million. Further, Airway & Ventilation sub-segment sales rose
3% to $190 million, boosted by the acquisition of Newport Medical
and strong growth in ventilator sales.
Revenues from Energy Devices climbed 7% to $339 million, again
reflecting strong double digit vessel sealing sales. Revenues from
Oximetry and Monitoring sub-segment surged 14% to $250 million,
owing to higher sales of monitors and sensors. Moreover, Vascular
product sales grew 4% to $404 million, backed by solid growth
across neurovascular, peripheral vascular and chronic venous
insufficiency offerings, offset by depressed compression products
Revenues from Covidien's Pharmaceuticals segment jumped 13% year
over year to $573 million on the back of robust gains in sales of
Specialty Pharmaceuticals sales soared 53% to $217 million spurred
by solid revenue from the newly launched Concerta ER tablets and
the Exalgo product. Active Pharmaceutical Ingredients sales
increased 11% mainly due to higher narcotic product sales. But
Contrast Product sales declined 13% because of lower sales of
Optiray in the U.S. Revenues from Radiopharmaceuticals were down 5%
in the quarter.
Sales from Medical Supplies segment inched up 1% to $439 million
in the quarter as increased sales of Nursing Care offerings was
offset by soft SharpSafety and OEM product sales.
Gross margin was 57.6% in the first quarter compared to 57.9% in
the year-ago comparable period. On an adjusted basis, gross margin
was 57.6% versus 58.1% in the prior year-quarter. Unfavorable raw
material costs in the pharma segment along with a reactor shutdown
offset improved productivity and favorable business mix.
Selling, general and administrative expenses were higher at 31.2%
of sales in the reported quarter compared with 31.0% of sales in
the year-ago quarter due to increased costs associated with
acquisitions, divestment, and the medical device excise tax as well
as sales and marketing initiatives in emerging markets. R&D
expenses were down to 5.2% of revenues versus 5.7% in the
prior-year period. Adjusted operating margin stood at 22.2%
compared with 22.1% a year ago.
Covidien repurchased roughly 3.2 million ordinary shares under its
share buyback program in the second quarter.
The company refrained from providing any guidance for 2013 until
the spin-off of the Pharmaceutical unit is complete. It will
announce guidance, excluding Pharma, after the market closes on May
3. The company will also provide a separate fiscal 2013 guidance
for Mallinckrodt plc on that date.
The fiscal 2013 Zacks Consensus Estimates for revenues and
earnings are $11,845 million and $4.50 per share,
About the Company
Covidien is a leading global health care products company with an
impressive history of developing and manufacturing high quality
products in a cost-effective manner. The company boasts of a well
diversified product and technology portfolio.
The company is adequately placed to achieve its long-term revenue
and earnings growth targets based on its attractive fundamentals,
strategic R&D investment, effective execution, new product
cycle and expansion into emerging markets. It is also enhancing
shareholders' value through dividends and share repurchases,
leveraging healthy free cash flows and strong earnings power.
However, Covidien faces stiff competition and remains exposed to
pricing and utilization headwinds, along with acquisition risks. We
remain concerned about the tepid U.S. health services industry and
the soft European economy. Also, foreign exchange translation is
expected to dampen growth.
Covidien currently carries a short-term Zacks #3 Rank (Hold).
Other companies like NuVasive ( NUVA ),
Exactech ( EXAC ) and
Perrigo ( PRGO ), are expected
to do well in the medical industry. NuVasive carries a Zacks Rank
#1 (Strong Buy) while the other two stocks carry Zacks Rank #2