Covidien Third Quarter Earnings Sneak Peek

S&P 500 (NYSE:SPY) component Covidien (NYSE:COV) will unveil its latest earnings on Thursday, July 26, 2012. Covidien is engaged in the development, manufacture, and sale of healthcare products for use in clinical and home settings. It operates its businesses through three segments: medical devices, pharmaceuticals, and medical supplies.

Covidien Earnings Preview Cheat Sheet

Wall St. Earnings Expectations: The average estimate of analysts is for profit of $1.06 per share, a rise of 5% from the company’s actual earnings for the same quarter a year ago. The average estimate is the same as three months ago. Between one and three months ago, the average estimate was unchanged. It also has not changed during the last month. Analysts are projecting profit to rise by 8.3% versus last year to $4.30.

Past Earnings Performance: Last quarter, the company beat estimates by 2 cents, coming in at net income of $1.05 a share versus the estimate of profit of $1.03 a share. It marked the fourth straight quarter of beating estimates.

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A Look Back: In the second quarter, profit rose 9.2% to $497 million ($1.02 a share) from $455 million (91 cents a share) the year earlier, exceeding analyst expectations. Revenue rose 5.2% to $2.95 billion from $2.8 billion.

Wall St. Revenue Expectations: Analysts predict a rise of 2.7% in revenue from the year-earlier quarter to $3.01 billion.

Stock Price Performance: Between April 25, 2012 and July 20, 2012, the stock price fell $1.44 (-2.6%), from $54.74 to $53.30. The stock price saw one of its best stretches over the last year between January 20, 2012 and January 27, 2012, when shares rose for six straight days, increasing 7.6% (+$3.66) over that span. It saw one of its worst periods between November 15, 2011 and November 25, 2011 when shares fell for eight straight days, dropping 11% (-$5.28) over that span.

Key Stats:

This upcoming earnings announcement will be a chance to build on positive earnings momentum over the last three quarters. Net income rose 1.8% in the fourth quarter of the last fiscal year and 15.7% in the first quarter before increasing again in the second quarter.

On the top line, the company is looking to build on four-straight revenue increases heading into this earnings announcement. Revenue rose 14.1% in the third quarter of the last fiscal year, 15.3% in the fourth quarter of the last fiscal year and 4.7% in the first quarter before increasing again in the second quarter.

Balance Sheet Analysis: The company’s current ratio of assets to liabilities came in at 2.3 last quarter. Having a ratio above 2:1 is usually considered a good indicator of a company’s liquidity and ability to meet creditor demands. The company regressed in this liquidity measure from 2.5 in the first quarter to the last quarter driven in part by an increase in liabilities. Current liabilities increased 9.6% to $2.64 billion while assets rose 0.9% to $6.08 billion.

Analyst Ratings: With 15 analysts rating the stock a buy, one rating it a sell and two rating the stock a hold, there are indications of a bullish stance by analysts.

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(Company fundamentals by Xignite Financials. Earnings estimates provided by Zacks)

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