Covidien Scales 52-Week High on Medtronic Deal Progress - Analyst Blog

Shares of Covidien plc ( COV ) reached a new 52-week high of $101.66 in mid-day trading on Nov 28. The company's shares closed marginally lower at $101 on the same day, translating into an impressive year-to-date as well as one-year return of around 48%.

Shares of this Irish company have been scaling new highs as the impending $42.9 billion merger with Medtronic, Inc. ( MDT ) is making considerable progress. Per the latest development, the European Commission has conditionally cleared the deal on Nov 28.

In a separate development, Medtronic's proposed acquisition of Covidien received a go-ahead from the U.S. Federal Trade Commission (FTC) on Nov 26, subject to the fulfillment of certain conditions. On the same day, the Canadian Competition Bureau also gave a green signal to the transaction.

Approvals by these agencies are conditional on Medtronic's commitment to divest Covidien's drug coated balloon business. Presuming the same, a subsidiary of Covidien has already entered into an agreement to divest these assets to The Spectranetics Corporation and the divestiture is expected to close shortly following the completion of Medtronic's buyout of Covidien.

The deal between Covidien and Medtronic was announced on Jun 15, 2014. Notably, shares of Covidien jumped nearly 21% the next day. Following the buyout - which is expected to close in early 2015 - Medtronic will boast a comprehensive product portfolio, a diversified growth profile and broad geographic reach.

Apart from the acquisition advancement, Covidien's impressive fourth-quarter fiscal 2014 (ended Sep 26, 2014) results, the recent U.S. Food and Drug Administration (FDA) and CE Mark approvals for its products along with a robust product pipeline contribute to the growth trajectory of this company.

Fourth-quarter earnings of $1.15 per share surged 26.4% from the year-ago quarter on the back of higher sales growth and stringent cost control. Earnings also beat the Zacks Consensus Estimate by 14 cents.

Moreover, revenues in the quarter increased 6.8% to $2.73 billion, outperforming the Zacks Consensus Estimate of $2.68 billion. The year-over-year growth was driven by strong performance across all segments.

This Zacks Rank #3 (Hold) stock has a market cap of around $46 billion while average volume of shares traded over the last three months stands at roughly 5 million.

Better-ranked stocks in the medical products industry include GW Pharmaceuticals ( GWPH ) and ICU Medical ( ICUI ). Both sport a Zacks Rank #1 (Strong Buy).

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MEDTRONIC (MDT): Free Stock Analysis Report

COVIDIEN PLC (COV): Free Stock Analysis Report

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ICU MEDICAL INC (ICUI): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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