Covidien Fourth Quarter Results Top Estimates

(RTTNews) - Medical device maker Covidien Ltd. (COV), which is being acquired by larger rival Medtronic, Inc. (MDT), reported Wednesday a profit for the fourth quarter that increased from last year, reflecting improved operating margins and sales growth. Both adjusted earning per share and quarterly revenues topped analysts' expectations.

Medtronic agreed in mid-June to acquire Covidien in a cash and stock deal valued at about $42.9 billion. The deal is currently expected to close in the fourth calendar quarter of 2014 or early 2015.

"We finished fiscal 2014 with an outstanding performance in the fourth quarter that greatly exceeded our expectations. Market share gains, strategic acquisitions, the successful launch of new products and productivity improvements all contributed to the achievement of double-digit earnings growth, both for the quarter and for the year," Chairman, President and CEO José Almeida said in a statement.

The Dublin, Ireland-based company reported net income of $517 million or $1.13 per share for the fourth quarter, higher than $372 million or $0.80 per share in the prior-year quarter.

Income from continuing operations for the quarter grew to $1.13 per share from $0.79 per share last year.

Excluding special items, adjusted income from continuing operations was $528 million or $1.15 per share, compared to $419 million or $0.91 per share in the year-ago quarter.

On average, 19 analysts polled by Thomson Reuters expected the company to report earnings of $1.02 per share for the quarter. Analysts' estimates typically exclude special items.

Net sales for the quarter increased 7 percent to $2.73 billion from $2.56 billion in the same quarter last year, and topped seventeen Wall Street analysts' consensus estimate of $2.69 billion.

Medical devices sales were up 8 percent to $2.34 billion, and U.S. medical supplies grew 3 percent to $395 million from last year.

Total domestic sales for the quarter improved 6 percent to $1.38 billion, emerging market sales increased 14 percent to $445 million, and non-U.S. developed markets sales grew 4 percent to $914 million from the year-ago quarter.

Surgical solutions sales grew 11 percent to $1.33 billion, as well as respiratory and patient care sales improved 3 percent to $974 million, and sales for vascular therapies increased 3 percent to $426 million from last year.

Operating margin for the quarter expanded 40 basis points to 18.8 percent from last year's 18.4 percent, as gross profit margin improved 270 basis points, partially offset by impairment of in-process research and development.

Income tax benefit for the quarter was $116 million, compared to income tax expense of $79 million last year.

COV closed Tuesday's regular trading session at $92.03, up $0.42 on a volume of 2.76 million shares.