Covidien plc. (COV)

COV 
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0.13
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Industry: Health Care
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Covidien plc (COV)

June 12, 2013 12:20 pm ET

Executives

Coleman N. Lannum - Vice President of Investor Relations

Jose E. Almeida - Chairman of the Board, Chief Executive Officer and President

Analysts

David H. Roman - Goldman Sachs Group Inc., Research Division

Presentation

David H. Roman - Goldman Sachs Group Inc., Research Division

Before I introduce the next presentation, we are required to make certain disclosures in public appearances about Goldman Sachs' relationships with companies that we discuss. The disclosure relates to investment banking relationships, compensation received through 1% or more ownership. I'm prepared to read disclosures to any -- for any issuer now or at the end of this presentation if anyone would like me to. However, these disclosures are available in our most recent reports available to you as clients on our firm portals. In addition, updates to those disclosures are available by ticker on the firm's public website at gs.com. In addition to disclosures applicable to research with respect to issuers if any mentioned herein are available through your investment representative.

So with that, I want to introduce our next presentation from Covidien. We have Cole Lannum, Chairman and Chief Executive Officer -- sorry. Joe Almeida, Chairman and Chief Executive Officer; Cole Lannum, Vice President from Investor Relations. And Cole had a nice shower and breakfast today, letting Joe do the talking, so we'll see how you do during this presentation. And obviously, I want to keep this as interactive as possible.

Coleman N. Lannum

Well, now as you've elevated me to CEO, I might do something differently.

David H. Roman - Goldman Sachs Group Inc., Research Division

Anything is possible, I'm sure.

Question-and-Answer Session

David H. Roman - Goldman Sachs Group Inc., Research Division

Maybe a good place to start is just on through the health of the end market. I know it's probably a question you get pretty commonly, it, I know, bounces around quarter-to-quarter but maybe just your perspective on what you're sort of seeing, broadly speaking, maybe and if you want to break it out, U.S., Europe, emerging markets or however you're sort of you're looking at, it might be helpful.

Jose E. Almeida

We have not seen much difference between what we have been speaking about the U.S. since our last call, at the end of the March quarter. You'll continue to see the same trends where there is a focus on medical devices and technology and also, the utilization of technology. So much more conscientious effort in looking at the use of technology associated with also pricing pressures. We still think that companies that have large offerings within a specialty, I want to make sure that I'm clear about that, that, that's not about having every product at the hospital needs. I don't think that trend will ever take off. But if you have a good and full offering within specialties of the hospital, like neurovascular, peripheral vascular, general surgery, you are better poised to compete in this environment. In Europe, it's no different. So that same dynamic applies in Europe. You see more the formation of groups of hospitals. Germany had already that going on but you've seen that in more places, and therefore, that changes how you approach that market, which was always been a tender-driven market but also, I think, the ability to have more of an offering to a certain group of hospitals is a better thing. In terms of the market, end market growth in Europe, no changes from what we reported. It's still a very difficult market in low single-digits, as well as the U.S., as we have reported back at the end of March quarter. But I would say that even in Europe, like in the U.S., if you have strong offering, you have the technology, you can still have good growth. And we've been showing growth above market in that tough market. I would say that I see no -- we see no changes in the end markets in Spain and Italy being very difficult today. Emerging market is a completely different story. Despite what everybody sees and hears about Brazil, inflation at 6.5% to 7%, there's a commitment from those markets to become better equipped to provide health care for their systems. And that is the wave that we are riding right now where there's a significant expansion of providers in places like China, India. In Brazil, it's not an expansion of providers, but it's more of people being able to get access to health care, the public systems in Brazil are doing better, so I find that dynamic very favorable to medical devices.

David H. Roman - Goldman Sachs Group Inc., Research Division

And as you think about the growth rate of the company going forward, I think emerging markets right now is in low-teens, as a percentage of total, and that becomes presumably larger over time. Is that really the swing factor that gets to sort of the sustainable 4%, 5%, 6% type top line growth or is there any reason to think that you could see an upward movement to develop market growth rate?

Jose E. Almeida

I would say that, that emerging markets growth being the biggest force behind our overall growth but also -- no, 3 areas that I would just mention being of more of a needle movers for Covidien: energy; Endomechanicals and laparoscopy surgery; and the third is neurovascular. So we think we have very good spaces that still provide for good technology to grow through market share. I would say emerging markets and developed markets, we still have a great opportunity for untapped markets like MIS market, minimally-invasive surgery market is still a great opportunity for Covidien.

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