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Covidien Is Growing Where Others Don't

NEW YORK ( TheStreet) -- Shares of Covidien (COV) are up 14% so far on the year, while posting gains of almost 25% over the past six months. When going back a little further to its low of $44.52 in January 2012, this stock is up almost 50%.

Remarkably, no one's talking about it.

Even though I've always had a great deal of respect for the larger medical technology rivals including Johnson & Johnson (JNJ) and Abbott Laboratories (ABT), I've admired Covidien's growth and solid execution.

Regrettably, I've never had guts to buy the stock.

Now that Covidien has taken off, I wonder how long management can sustain this level of performance while avoiding the inevitable trip-ups commonplace in this sector.

After a solid first-quarter performance where Covidien beat on both the top and bottom lines, the company had even more dominant second-quarter results. For investors waiting to buy on a possible pullback, this isn't the quarter where that's likely to happen.

In this sector, quarterly performance is measured by how well companies can grow organically, despite what the operational results may show. To that end, Covidien's 5% organic growth performance stands as one of the best among the med-tech companies that have reported thus far, including Johnson & Johnson and Abbott Labs.

By contrast, even though Johnson & Johnson just posted almost 9% revenue growth and is a dominant player in the med-tech space, concerns about the company's organic growth have emerged as a result of just 3% growth this recent quarter. JNJ is eight times the size of Covidien.

Here too, Covidien's "nimbleness" introduces another attractive quality: JNJ is seen as being too big.

When comparing Covidien to Abbott Labs, which is only twice the size of Covidien in terms of market cap, the story looks even better because Abbott posted only 2% revenue growth this quarter. Similarly, in the devices business -- which has seen a broad decline within the sector -- Covidien's 6% growth really stands out, albeit on an operational basis. By contrast, Abbott posted a 3% decline.
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