UPDATE 5-Covidien profit tops views on device rebound

* Q4 EPS ex-items 84 cents vs analysts’ view 74 cents

* Q4 revenue up 3 percent to $2.67 billion

* Leaves fiscal 2011 outlook unchanged

* Shares rise 5.1 percent
(Adds more analyst comments, updates stock price)

By Susan Kelly and Debra Sherman

NEW YORK, Nov 9 (BestGrowthStock) – Covidien Plc (COV.N: ) reported a
higher-than-expected quarterly profit as a bounce in demand for
its medical devices offset continued weak pharmaceutical sales,
and its shares rose as much as 7.5 percent.

A number of medical device companies reported soft sales in
the latest quarter, reflecting a slowdown in medical procedures
as patients who have lost health insurance or faced sharp rises
in premiums delay seeking treatment in the weak economy.

However, Covidien said on Tuesday it saw a broad-based
rebound across several of its surgical and medical product
lines.

“We saw the bounceback pretty much across the line,” said
Covidien Chief Executive Officer Richard Meelia. “It’s a canary
in the coal mine kind of scenario.”

Goldman Sachs analyst David Roman said the company showed
stabilization in core product lines tied to elective procedure
volumes.

“This will likely be viewed as a positive, given the
somewhat more bearish results medical device companies and
hospitals reported in procedure volumes during the third
quarter,” Roman wrote in a research note.

Net profit at Covidien, which was spun off from Tyco
International (TYC.N: ) three years ago, rose to $443 million, or
89 cents a share, in the fourth quarter ended Sept. 24 from $56
million, or 11 cents a share, a year earlier.

Excluding special items, earnings increased to 84 cents a
share from 71 cents. On that basis, analysts on average had
expected a profit of 74 cents, according to Thomson Reuters
I/B/E/S.

Revenue rose 3 percent to $2.67 billion, while analysts had
forecast $2.64 billion.

Sales of medical devices rose 9 percent to $1.77 billion,
boosted by demand for surgical stapling, laparoscopic and other
specialty products as overall surgical procedures rose.

Pharmaceutical sales declined 12 percent to $465 million,
hurt by the sale of the company’s U.S. nuclear pharmacies
business and weakness in specialty drugs.

The company said the quarter represented a low point for
its pharmaceutical sales, which it expects to rebound in fiscal
2011.

Roman also noted that the company continued to invest in
research and development, while required levels of sales,
general and administrative expenses were tracking below his
expectations.

Covidien left its fiscal 2011 revenue projection
unchanged.

In September, Covidien forecast fiscal 2011 net sales to
rise 6 percent to 9 percent, driven by a 10 percent to 13
percent boost in medical device sales. It projected sales of
medical supplies at flat to up 3 percent and pharmaceuticals at
flat to down 5 percent.

At the time, it also projected operating margins, excluding
one-time items, of 20 percent to 21 percent.

Rick Wise, an analyst with Leerink Swann, noted that Wall
Street’s expectations were low for Covidien after last
quarter’s disappointing performance.

“Low expectations helped a lot,” he said, but added that
each segment of the company — medical products, supplies and
pharmaceuticals — performed better or at least stabilized.

Shares of Covidien touched an almost 6-month high of
$44.46, before trading up 5.1 percent at $43.46 at
mid-afternoon on the New York Stock Exchange.
(Reporting by Susan Kelly and Debra Sherman; Editing by Lisa
Von Ahn, Gerald E. McCormick, Dave Zimmerman and Richard
Chang)

UPDATE 5-Covidien profit tops views on device rebound