Irish healthcare products company Covidien Plc (COV: Quote) reported Friday a higher profit for its second quarter, boosted by improved performance of medical devices and pharmaceuticals segment. Quarterly earnings per share and top line beat Wall Street estimates. Looking forward, the company said it remains comfortable with its already given forecast for fiscal 2012.
Chairman, President and CEO José Almeida said, "Our second-quarter performance was paced by good top-line growth, improvements in gross and operating margin and a double-digit increase in earnings per share. Once again, our largest business segment, Medical Devices, drove our strong performance, with broad-based growth that was led by double-digit advances in Energy and Vascular products."
For its second quarter, Covidien's net income climbed to $497 million or $1.02 per share from last year's $455 million or $0.91 per share. Adjusted earnings, which excluded specified items, were $1.05, a 13 percent increase from $0.93 in the prior-year quarter. On average, 18 analysts polled by Thomson Reuters expected earnings per share of $1.03 for the quarter. Analysts' estimates typically exclude one-time items.
Quarterly net sales grew 5 percent to $2.95 billion from $2.80 billion a year ago, beating Wall Street analysts' consensus estimate of $2.90 billion. Foreign exchange rate movement lowered the quarterly sales growth rate by one percentage point, the company added.
Segment-wise, medical devices sales rose 7 percent to $2 billion driven by new products and increased volume. Sales in Endomechanical increased on good growth for stapling products led by innovative Tri-Staple reloads.
In the pharmaceuticals segment, sales increased 4 percent as Specialty Pharmaceuticals climbed sharply due to strong growth for the EXALGO and PENNSAID products as well as increased sales of generics. This was partly offset by lower sales of Active Pharmaceutical Ingredients as sales of narcotics declined related to customer order timing.
Medical supplies' second-quarter sales were unchanged as increased sales of Medical Surgical and OEM products were offset by lower sales of Nursing Care and SharpSafety products.
The company noted that its European sales growth accelerated for the second quarter in a row, even though the economic conditions in that region remain challenging and will continue to require close monitoring.
Second-quarter gross margin rose 0.9 percentage points to 57.9 percent, reflecting positive business mix and benefits from the company's manufacturing cost reduction program.
Operating income, meanwhile, declined to $609 million from last year's $615 million, reflecting higher expenses, and adjusted operating margin dropped to 22.1 percent from 22.2 percent a year ago.
While announcing its first-quarter results back in January, Covidien had said that it estimates net sales in fiscal 2012 to be up 1 percent to 3 percent, and excluding the impact of foreign exchange, sales will increase 3 percent to 5 percent. Operating margin is expected to be at 22 percent to 23 percent.
Almeida then had noted that the company face some pressure on reported results due to the recent strengthening of the U.S. dollar, yet remains comfortable with the then annual consensus earnings per share estimates for 2012.
Analysts currently expect earnings of $4.29 per share for the year.
Covidien shares closed Thursday's trading at $55.04, up $0.30 or 0.55 percent.
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by RTT Staff Writer
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