UPDATE 3-Covidien sales slow; shares fall

* Q2 EPS of 88 cents beats average estimate by 5 cents

* Sales fell 5 percent to $2.7 billion

* Lowers 2010 sales outlook

* Shares down 3.4 percent
(Recasts first paragraph with sales slowing; adds analyst
comments, stock activity)

CHICAGO, April 21 (BestGrowthStock) – Healthcare products company
Covidien Plc (COV.N: ) reported a higher-than-expected quarterly
profit, but sales slowed, sending its shares lower.

Covidien now expects sales will increase 5 percent to 8
percent in fiscal 2010, down from its previous forecast of 6 to
9 percent, reflecting weakness in certain product lines, the
strengthening of the U.S. dollar against most currencies, and
other factors.

Shares of Covidien were down 3.4 percent to $50.49 in
afternoon trading on the New York Stock Exchange.

“What really concerned investors was that there was
weakness across all segments,” said Morningstar analyst Alex
Morozov. “That’s what was unusual about this quarter.”

He noted poor performance in the company’s surgical
supplies and soft tissue businesses, which was especially
concerning.

“People got used to exceptional growth rates, especially in
medical devices,” Morozov said.

Still, the gross margin was up 4.7 percent from a year
earlier to 55.7 percent.

Earnings per share from continuing operations rose to 85
cents per share in the second quarter ended March 26 from 37
cents a year earlier.

Excluding items, the Dublin-based company earned 88 cents
per share, up 22 percent from a year before and beating
forecasts of 83 cents, according to Thomson Reuters I/B/E/S.

Operating income of $561 million, while hit by a $183
million charge for shareholder settlements, benefited from a
much lower effective tax rate of 21.5 percent, down from 64.1
percent a year earlier.

But net sales fell 5 percent to a weaker-than-expected $2.7
billion, primarily because of weak sales of the Oxy ER drug,
which dragged pharmaceutical segment sales down 30 percent to
$619 million. Sales of medical devices, the company’s biggest
business, jumped 11 percent from a year before to $1.6
billion.

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(Reporting by Christopher Kaufman and Debra Sherman; Editing
by Lisa Von Ahn, Gerald E. McCormick and Tim Dobbyn)

UPDATE 3-Covidien sales slow; shares fall