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Covidien plc. (COV - Analyst Report) is set to report its first-quarter fiscal 2013 results, before the market opens, on Friday, Jan 25. Let’s see how things are shaping up prior to the announcement.

In the last quarter, the international health care product major posted a 2.00% positive earnings surprise, reflecting better-than-expected sales and improved expense control.

Factors to Consider this Past Quarter

Covidien continues to expand both organically as well as inorganically, despite a challenging Med-tech environment. Further, the company remains committed to delivering incremental returns to its investors through dividend hikes and share repurchase programs.

We see opportunities for multiple expansions, based on the strength and diversity of the company's business and its ability to grow on the back of strategic investments and portfolio reshaping initiatives toward high-growth/high-margin businesses. Additionally, the exit of a competitor in the nursing care business has presented opportunities for the company to gain market share in the U.S.

However, we remain concerned regarding product recall-related issues, which might affect its top-line growth. Tough competition as well as acquisition and divestment risks continue to be major headwinds for the company.

Earnings Whispers?

Our proven model does not conclusively show that Covidien is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP (Expected Surprise Prediction) (Read: Zacks Earnings ESP: A Better Method) as well as a Zacks Rank of #1, 2 or 3 for this to happen. This is not the case here as you will see below.

Zacks Earnings ESP:  The Most Accurate estimate stands at $1.06, while the Zacks Consensus Estimate is also pegged at $1.06. This comes to a difference of 0.00%.

Zacks Rank #3 (Hold): Covidien’s Zacks Rank #3 (Hold) lowers the predictive power of ESP. The Zacks Rank #3 together with 0.00% earnings ESP makes surprise prediction difficult.

Other Stocks to Consider

Here are some other companies you may want to consider as our model shows that these have the right ingredients to post an earnings beat this quarter: 

NuVasive Inc. (NUVA - Snapshot Report), Earnings ESP of +72.73% and Zacks Rank #2 (Buy)

Quidel Corp. (QDEL - Snapshot Report),Earnings ESP of +26.67% and Zacks Rank #2 (Buy)

Hill-Rom Holdings, Inc. (HRC - Snapshot Report), Earnings ESP of +2.27% and Zacks Rank #2 (Buy)

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