Covidien sees strong quarter on device sales, emerging markets growth

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Earnings season continues, and this morning, Covidien ($COV) released positive results in a quarter that witnessed a 7% rise in device sales.

In all, the company's net sales increased 5% to $2.95 billion, versus last year's second-quarter result of $2.8 billion. For medical devices alone, Covidien saw sales of $2 billion compared with $1.88 billion a year earlier. The company credited new products and increased volume as the reasons for the increase.

Vascular products and energy devices, which includes vessel sealing, electrosurgical and ablation products, both saw a strong quarter, with 17% and 12% growth in sales, respectively.

Emerging markets were a positive area for Covidien, particularly in the BRIC countries. During a call on the results, Joe Almeida, Covidien's president, chairman and CEO, said the company saw accelerated growth in Asia, where it is staffing up quickly.

The company even did well in Europe, where challenges remain. "Our European sales growth accelerated for the second quarter in a row," Almeida said in a statement. "The second-quarter operational gain of 6% was the fastest growth we have seen in Europe in more than two years."

When asked about the progress of the spinoff of its pharmaceutical group, Almeida said there wasn't much in terms of an update. However, "everything on our dashboard is showing green," he added. The company announced that it was spinning off its pharma business into a standalone company last December. And a lot of things still need to be done, said CFO Chuck Dockendorff, who didn't speculate when exactly in 2013 the spinoff would be complete.

In terms of R&D growth, Almeida said to watch for efforts in vessel sealing, neurovascular, stapling and emerging markets. Almeida remains "bullish" about his company's R&D efforts.

When asked about the implications of the impending device tax for his company, he said he wasn't prepared to disclose all of the options Covidien is considering. But he did label the tax "absurd" and a penalty on the device industry.

Covidien's shares have had a good year, closing up 22% so far. Shares closed at $55.04 on Thursday and were inactive in premarket trading, according to Dow Jones.

Separately, instrument maker PerkinElmer ($PKI) announced its quarterly results yesterday afternoon, and reported higher-than-expected net profits, as Reuters notes. The company got a boost from its human health division, which makes neonatal testing equipment, among other items. That unit's revenue jumped 26% to $254 million during the quarter, up from $201.3 million a year earlier.

Europe and emerging markets boosted the company, Chairman and CEO Robert Friel told Dow Jones. "We went into the year being somewhat cautious, which was appropriate," he explained. "In the first quarter, we're a little bit more confident about the integration of the acquisitions." Its most recent was the $600 million pick up of Caliper Life Sciences.

- get the Covidien release
- see the Dow Jones story on Covidien
- get the Perkin Elmer release
- see more from Dow Jones (reg. req.) on PerkinElmer
- read the Reuters report

Special Report: Covidien - Top 10 Medical Device R&D Budgets

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