Covidien Q4 Adj Profit Tops View, Revenues Match; Backs 2014 Outlook

(RTTNews) - Healthcare products company Covidien Ltd. (COV) reported Friday a profit for the fourth quarter that decreased from last year, reflecting higher charges and unfavorable foreign exchange.

Adjusted earning per share topped analysts' expectations by a penny, while quarterly revenues matched their estimates. The company also reaffirmed its sales growth forecast for the full-year 2104.

"We delivered a solid performance in the fourth quarter and finished 2013 in line with our expectations. That said, reported sales growth were negatively impacted by the strength of the U.S. dollar against most foreign currencies," Chairman, President and CEO José Almeida said in a statement.

The Dublin, Ireland-based company reported net income of $372 million or $0.80 per share for the fourth quarter, lower than $461 million or $0.95 per share in the prior-year quarter.

Income from continuing operations for the quarter declined to $364 million or $0.79 per share from $400 million or $0.83 per share in the year-ago quarter.

Excluding special items, adjusted income from continuing operations was $419 million or $0.91 per share, compared to $413 million or $0.86 per share in the corresponding quarter a year ago.

On average, 19 analysts polled by Thomson Reuters expected the company to report earnings of $0.90 per share for the quarter. Analysts' estimates typically exclude special items.

Net sales for the quarter increased 2 percent to $2.56 billion from $2.50 billion in the same quarter last year, and matched fifteen Wall Street analysts' consensus estimate of $2.56 billion.

The company noted that foreign exchange rate movement lowered the quarterly sales growth rate by three percentage points.

Total domestic sales for the quarter were $1.30 billion, down 2 percent from the prior-year quarter, and international sales grew 8 percent to $1.27 billion from the year-ago quarter.

Medical devices sales grew 3 percent from last year to $2.13 billion, while sales for medical supplies declined 1 percent year-over-year to $434 million. The company spun-off its pharmaceutical products business in July.

"We had strong growth in Endomechanical Instruments and Energy, as well as in all major product lines in emerging markets resulting from investments in these regions. We also registered double-digit sales growth for Oridion, superDimension, BÂRRX and Newport during the quarter, which demonstrates our continued success in operating these businesses acquired in 2012," Almeida added.

Gross profit margin expanded 20 basis points from last year, but operating margin contracted 60 basis points to 18.4 percent from last year's 19.0 percent as research and development expenses increased 110 basis points.

For fiscal 2013, the company reported net income of $1.70 billion or $3.61 per share, lower than $1.91 billion or $3.92 per share in the prior year. Income from continuing operations for the year was $1.60 billion or $3.40 per share, compared to $1.64 billion or $3.37 per share in the year ago.

Excluding special items, adjusted income from continuing operations was $1.751 billion or $3.72 per share, compared to $1.752 billion or $3.61 per share in the year ago. Analysts expected the company to report earnings of $3.71 per share for fiscal 2013.

Net sales for the full year increased 4 percent to $10.24 billion from $9.85 billion posted last year. Analysts had a consensus revenue estimate of $10.24 billion for the full-year 2013.

Looking ahead to fiscal 2014, the company reaffirms its guidance issued in September 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 $64.94, down $0.36 on a volume of 3.09 million shares.