This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Covidien Scopes Out Medical Technology Growth


The company has never been shy about acquisitions since it was spun off from Tyco International (TYC) six years ago. But management has always found ways to not only make these deals work but, in most cases, to exceed Street expectations in both revenue and profits. I don't believe this deal, as questionable as the timing might be, will be any different.

While this deal won't add any immediate oomph to Covidien's consolidated results, it does, however, extend Covidien's market share in addressable colonoscopy. Not to mention, it presents an immediate area of collaboration since Covidien already has an endomechanical business. With Given's PillCam, which is seen as an improvement to conventional minimally invasive surgery (MIS), and its other devices, Covidien stands to gain share from market leaders Johnson & Johnson and Intuitive Surgical (ISRG).

So despite its high price tag,  the acquisition might yield an immediate payoff. There is longer-term potential, too: the MIS market may still grow by at least 60% in the next several years.

All of that said, there are some risks here that management must address, not the least of which is the ongoing weakness in both the contrast products business and radiopharmaceuticals.

Management has done a great job offsetting these deficits with strong performance in areas including active pharmaceutical ingredients. But expectations have now been raised even higher. With the stock having posted such strong year-to-date gains, this new acquisition is certain to put a spotlight on the company's organic growth performance.

Until there is a meaningful sign of a slowdown, Covidien will remain a top favorite for medtech performers in 2014.

At the time of publication, the author held no position in any of the stocks mentioned.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

2 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
COV $106.71 -1.26%
AAPL $123.38 0.50%
FB $95.29 1.19%
GOOG $628.00 0.12%
TSLA $264.82 4.67%

Markets

Chart of I:DJI
DOW 17,630.27 +189.68 1.09%
S&P 500 2,093.25 +25.61 1.24%
NASDAQ 5,089.2060 +49.43 0.98%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs