All that bargain hunting is starting to pay off for Covidien Plc. (NYSE:COV).
Despite relatively flat sales growth overall, the Mansfield, Mass.-based medical products giant saw sales in its medical devices segment jump some 6 percent buoyed by sales of new products the company acquired in the recent VNUS Medical Technologies and Aspect Medical Systems buyouts.
Overall, the Covidien posted just under $2.56 billion in total sales during the three months ended June 25, 2010, a 2 percent increase compared to the $2.51 billion the company posted during the comparable period last year, according to a statement.
The company’s medical devices segment once again led the way, posting $1.63 billion in sales, compared to $1.53 billion during the same period last year. The 7 percent increase came primarily from significant growth in the firm’s vascular products and oximetry & monitoring divisions that both posted 22 percent increases from comparable periods last year. Officials credited the new products from its VNUS and Aspect buyouts as key contributors.
For the year, sales at Covidien’s medical devices segment remains about 11 percent better than last year at $ 4.9 billion, compared to $4.4 billion.
Despite the flat sales overall, Covidien managed to stretch its profits by some 30 percent to $364 million or about 72 cents per share, compared to $281 million or 54 cents per share for the same period last year.
Most of the beefed up bottom line came from the absence of a $59 million R&D charge the company recorded during the third quarter in 2009 after its buyout of VNUS in May 2009. In addition, Covidien trimmed some $20 million from its overall R&D budget during Q3.
The company also recorded a $25 million restructuring charge during the quarter, mostly from severance packages as it worked to fold new acquisitions into its corporate structure.
Despite the strong bottom line, analysts seemed tepid to Covidien’s performance, Leerink Swann analysts called the company’s performance, "basically as expected" in a note to investors, despite the fact that the firms EPS beat Wall Street’s consensus estimates.
Shares of the firm’s stock were down some 4.6 percent to 36.74 in morning trading on Wall Street.