Covidien Limited (COV), the medical device manufacturer, has surprised on estimates 7 quarters in a row. Will it do it again on Apr 30? Second quarter estimates have risen by nearly 17% in the last 3 months. COV has a forward P/E of 11.35.

Company Description

Covidien manufactures medical devices, pharmaceutical products and medical supplies. The company has offices in 59 countries and customers in more than 140 countries.

First Quarter Produces Earnings Surprise

On Jan 26, Covidien reported first-quarter 2009 results that beat Wall Street estimates by 8.57%. The company reported 76 cents compared to analysts’ estimates of 70 cents per share.

During a difficult economic period, sales still rose 6% to $2.5 billion from $2.3 billion in the year ago period.

Pharmaceutical products were especially strong in the quarter, rising 50% over the prior year’s sales to $331 million from $221 million on the back of higher sales of Dosage pharmaceuticals, especially $100 million in sales of oxycodone hydrochloride extended-release tablets.

Medical device sales climbed 3% and Medical Supplies jumped 8%. Only Imaging Solutions fell, declining 9%.

In January, the company was optimistic about 2009.

“We are off to a good start in fiscal 2009, as operational growth of 10% was in line with our expectations,” said Richard J. Meelia, President and CEO.

“We benefited from the September, 2008, launch of oxycodone extended-release, as well as several other new products. Despite unfavorable foreign exchange, we reported strong growth in our first-quarter operating earnings,” he said.

2009 Guidance Confirmed

In January, the company reconfirmed its prior 2009 guidance. It estimated net sales for the year would be flat to 3% higher. Sales of oxycodone hydrochloride were expected to contribute about 40 cents to 2009 earnings.

Consensus Estimates Rise

Analysts are optimistic about 2009 going into the second-quarter earnings results which are scheduled to be released on Apr 30. Second quarter estimates rose 16.7% to 84 cents from 72 cents in the last 90 days.

Full-year 2009 consensus estimates are up 8 cents in that same period to $2.96.

Value Fundamentals

Covidien is a Zacks #1 Rank (strong buy) stock. It has a forward P/E of 11.35 and a price-to-book of 2.13. The company has an outstanding 1-year return on equity (ROE) of 18.98%.

COV has surprised on estimates the last 4 quarters by an average of 9.70%. As an added bonus, Covidien pays a dividend with a current yield of 1.92%.

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