Can Covidien (COV) Keep the Earnings Streak Alive? - Analyst Blog
April 24 2014 - 6:00PM
Zacks
Covidien plc (COV) is set to report its
second-quarter fiscal 2014 results on April 25, 2014. In the last
reported quarter, the company had posted a positive earnings
surprise of 6.38%. In fact, Covidien delivered positive surprises
in all of its last 4 quarters, with an average beat of 2.61%. Let's
see how things are shaping up for this announcement.
Factors at Play in the Past Quarter
Despite unfavorable foreign exchange rate, the medical device
tax and incremental investments in emerging markets, Covidien's
first-quarter earnings rose 3.1% year over year to $1.00 per share
and beat the Zacks Consensus Estimate by 6 cents.
In the last reported quarter, Covidien's adjusted operating
earnings declined 0.8% year over year to $599 million, while
reported operating earnings dropped 10.9% to $531 million.
Unfavorable foreign exchange rate and the medical device tax led to
this decline in both the reported and adjusted operating
earnings.
However, management remains impressed with the 2.8%
year-over-year increase in the company's revenues to $2,639
million, which exceeded the Zacks Consensus Estimate by 1.42%. The
company expects revenues to grow 2–5% year over year at constant
exchange rate for fiscal 2014.
Earnings Whispers?
Our proven model does not conclusively show that Covidien is
likely to beat earnings this quarter. That is because a stock needs
to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3
for this to happen. That is not the case here, as you will see
below.
Zacks ESP: Covidien has a negative Zacks
ESP. That is because the Most Accurate estimate stands at 94 cents
while the Zacks Consensus Estimate is higher at 95 cents. That
leads to a difference of -1.05%.
Zacks Rank: Covidien's Zacks Rank #3 (Hold)
when combined with a negative ESP makes surprise prediction
difficult. We caution against stocks with Zacks Ranks #4 and 5
(Sell-rated stocks) going into the earnings announcement,
especially when the company is seeing negative estimate revisions
momentum.
Other Stocks to Consider
Here are some other medical companies you may want to consider
as our model shows they have the right combination of elements to
post an earnings beat this quarter:
Align Technology Inc. (ALGN), earnings ESP of
+13.89% and a Zacks Rank #1 (Strong Buy).
Myriad Genetics Inc. (MYGN), earnings ESP of
+10.87% and a Zacks Rank #1 (Strong Buy).
Cardinal Health, Inc. (CAH), earnings ESP of
+1.00% and Zacks Rank #2 (Buy).
ALIGN TECH INC (ALGN): Free Stock Analysis Report
CARDINAL HEALTH (CAH): Free Stock Analysis Report
COVIDIEN PLC (COV): Free Stock Analysis Report
MYRIAD GENETICS (MYGN): Free Stock Analysis Report
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