|
CHICAGO: Covidien Plc reported an adjusted profit that beat estimates on better margins, but saw weak pharmaceutical sales in the quarter and through the year, and its shares fell.
Executives of the healthcare products company told analysts on a conference call that they expected 2010 pharmaceutical sales to be "well below" 2009 levels, as many of Covidien's older brands are facing expanded competition.
Shares of Covidien tumbled by nearly 8 percent in early trading to their lowest level in a year, before recovering some ground to be down 4.2 percent to $36.89 in late morning trade.
Covidien posted a net profit of $364.0 million, or 72 cents a share, in its fiscal third quarter ending June, compared with $281.0 million, or 56 cents a share, in the year- ago period.
Excluding items, Covidien earned 85 cents per share, beating analysts' average estimate of 80 cents, according to Thomson Reuters I/B/E/S.
Net sales rose 2 percent to $2.56 billion, just shy of the $2.61 billion analysts were expecting.
Sales of pharmaceuticals fell 6 percent from a year ago to $507 million, while sales of medical supplies, such as sutures and needles, dipped 3 percent from a year ago to $439 million.
Covidien executives expected total sales and the tax rate for the full year to be below previously forecasted levels, but backed an earnings outlook calling for double-digit growth. In April, the company revised down its revenue outlook to 5 to 8 percent growth from its January forecast of 6 to 9 percent growth.
"The focus is on the top line and the weakness in pharma and medical supplies. The company didn't seem very certain about what was happening in pharma... they seemed surprised by the weakness," said Morningstar analyst Alex Morozov.
David Roman, an analyst with Goldman Sachs, said the weakness in Covidien's pharmaceutical segment appears to be driven by increased pricing pressure and slower product replenishing as hospitals use up their inventories in the company's generic pharmaceutical businesses.
But sales of medical devices, the company's biggest business, rose 6 percent to $1.63 billion on strong growth for its oximetry and monitoring, vascular and energy products, and well as contributions from its acquisition of Aspect Medical Systems, a maker of brain monitoring equipment.
Covidien also told the conference call that it has not been hurt by the decline in elective surgeries that has hit some other medical supply companies, since most of its products are used for nonelective procedures. Earlier, Becton, Dickinson and Co, another hospital products company, posted quarterly results that beat Wall Street's estimates. It said earnings from continuing operations of $1.30 per share, excluding items, on revenue of $1.88 billion for its fiscal third quarter ended June 30. However, Becton said it expects revenue growth for its full fiscal year to be about 5 percent, one percentage point less than its previous forecast, reflecting lower demand for the lab tests it makes. -Reuters
|