Covidien and ResMed Coverage: Medical Instruments Stocks Show Healthy Trend

Jan 31, 2013, 08:00 ET from

LONDON, January 31, 2013 /PRNewswire/ --

Healthcare stocks are making a comeback with healthy quarterly numbers. Major Medical Instruments & Supplies companies such as Covidien Plc (NYSE: COV) and ResMed Inc. (NYSE: RMD) not only beat consensus estimates but also provided optimistic guidance. These companies are also showing a growing trend of expanding in emerging markets in Asia. The sector is also seeing some consolidation with the companies carrying out acquisitions to boost their portfolio. StockCall free research report on Covidien and ResMed are available now. Register now to view them at

Covidien Grows through Acquisitions

Covidien Plc reported good quarterly results and managed to beat consensus estimates for revenue as well as net income. However, it also reported a 1.3 percent decline in its gross margin, which is a cause of concern. In comparison to the previous year, its operating income also declined. However, these metrics were higher than its previous quarter performance, thus showing a sign of improvement. Sign up today to read the free and complete technical analysis on Covidien at  

Covidien stock offered more than 20 percent return in the past 12 months. The stock also comes with 1.64 percent dividend yield, which combined with healthy capital appreciation makes Covidien an attractive stock to own. The stock is keeping up its good run and has appreciated almost 10 percent on a Year-to-Date basis. Covidien is looking to grow not only organically but also through acquisitions. In the past year, the company carried out various acquisitions including the acquisition of CV Ingenuity, to counter the competition posed by Medtronic.

Covidien trades at Price/Earnings ratio of 16.12, making it a fairly priced stock. However, it is likely to benefit from optimistic guidance provided by the management. The company expects its revenue to grow by 5 to 8 percent in fiscal 2013, while its earlier estimates were in the range of 3 to 6 percent. While its Medical Devices and Pharmaceuticals divisions are performing well, Covidien needs to spruce up is Medical Supplies unit to achieve more holistic growth.

ResMed Offers Consistent Returns

ResMed Inc. [Free Report on RMD] [1] hit a new 52-week high after reporting healthy quarterly results. The stock grew about 50 percent in 2012. The company reported higher margins for the quarter, while its sales grew 13 percent to touch $376.5 million figure. ResMed expects its current quarter revenue to be at $381.1 million, thus showing healthy upward trend. While ResMed already has a rather good 1.5 percent dividend yield, it is likely to increase its dividends as it boosts its revenue. The company is looking to augment its revenue by expanding into developing markets in Europe and Asia.

If good capital return along with dividend is not attractive enough then one should look at the company's stock repurchase track record. ResMed bought back $8 million worth of its stock in the last quarter. In fiscal 2013, it is planning to buy a minimum of 2 million shares. The company's cash reserve is consistently growing and its balance sheet is in solid position.

ResMed is looking beyond traditional markets and plans to expand in Asia and Western Europe. In next five years, the company is planning to stress on its R&D efforts to promote new products. The impact of these developments is expected to be visible through its share price appreciation.


  1. ResMed Inc. Technical Analysis [ ]

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