Covidien Q1 Results Top Estimates; Backs 2014 Outlook

(RTTNews) - Healthcare products company Covidien Ltd. (COV) reported Friday a profit for the first quarter that decreased from last year, despite sales growth, reflecting higher restructuring charges and lower margins. Adjusted earning per share and quarterly revenues topped analysts' expectations. The company also reaffirmed its sales growth forecast for the full-year 2104.

"We are off to an excellent start in fiscal 2014, with results exceeding our expectations. We continued the strong execution of our global strategy during the quarter, further positioning the company for long-term growth and increased shareholder value," Chairman, President and CEO José Almeida said in a statement.

The Dublin, Ireland-based company reported net income of $398 million or $0.87 per share for the first quarter, lower than $493 million or $1.03 per share in the prior-year quarter.

Income from continuing operations for the quarter declined to $398 million or $0.87 per share from $456 million or $0.96 per share in the year-ago quarter.

Excluding special items, adjusted income from continuing operations was $456 million or $1.00 per share, compared to $460 million or $0.97 per share in the corresponding quarter a year ago.

On average, 21 analysts polled by Thomson Reuters expected the company to report earnings of $0.94 per share for the quarter. Analysts' estimates typically exclude special items.

Net sales for the quarter increased 3 percent to $2.64 billion from $2.57 billion in the same quarter last year, and topped sixteen Wall Street analysts' consensus estimate of $2.60 billion by a whisker.

The company noted that foreign exchange rate movement lowered the quarterly sales growth rate by two percentage points. Excluding foreign exchange, operational sales growth was 5 percent.

Total domestic sales for the quarter were $1.31 billion, up 3 percent from the prior-year quarter, and emerging market sales increased 11 percent to $398 million, while non-U.S. developed markets sales decreased 1 percent to $934 million from the year-ago quarter.

Surgical solutions sales grew 6 percent from last year to $1.26 billion, and sales for vascular therapies increased 2 percent year-over-year to $425 million, while respiratory and patient care sales grew 6 percent from last year to $953 million.

Operating margin for the quarter contracted 310 basis points to 10.1 percent from last year's 23.2 percent, as gross profit margin declined 70 basis points, as research and development expenses increased 40 basis points and restructuring charges grew 190 basis points, all as a percentage of total sales.

Looking ahead to fiscal 2014, the company reaffirms its guidance issued in December that calls for year-over-year sales increase of 2 to 5 percent, and adjusted operating margin growth of 21.5 to 22.5 percent. Street Is currently looking for full-year 2014 revenues of $10.62 billion.

COV closed Thursday's regular trading session at $67.14, down $0.65 on a volume of 3.83 million shares.