Back to top

Analyst Blog

International health care products major, Covidien plc (COV - Analyst Report) announced a share repurchase program of $3 billion to leverage investor confidence. The company already has about 425 million shares available for repurchase under its $2 billion share repurchase program announced in 2011.

In 2012, Covidien returned more than $1.75 billion to its shareholders via share buybacks and dividends. This represented almost 100% of its free cash flow, which is well above the company’s target of returning at least 50% of its free cash flow to investors. In the first quarter of fiscal 2013, the company had repurchased roughly 4.4 million ordinary shares.

The share repurchase program reflects Covidien’s commitment to deliver incremental returns to investors leveraging a solid free cash flow and strong earnings. Covidien has a strong liquidity position to support the plan. The company ended the first quarter of fiscal 2013 with cash and cash equivalents of $1,399 million. It also generated $120 million in cash from operations in the quarter.

Covidien also declared its regular quarterly cash dividend of 26 cents per share, payable on May 3, 2013, to shareholders of record as on Apr 4, 2013. Earlier in Sep 2012, the company had raised its quarterly dividend by 16% to 26 cents from 22.5 cents.

Covidien’s peer, Patterson Companies (PDCO - Analyst Report), a Minnesota-based distributor of dental, veterinarian and rehabilitation medical supplies, also announced a share repurchase program as well as a dividend hike in an effort to leverage investor return.

Covidien is well positioned to achieve its long-term revenues and earnings growth targets based on its attractive fundamentals, strategic R&D investment, new product cycle and expansion into emerging markets. It currently carries a Zacks Rank #2 (Buy).

However, Covidien faces stiff competition and remains exposed to pricing and utilization headwinds, along with acquisition risks. We also remain concerned about the tepid U.S. health services industry and the soft European economy. In addition, foreign exchange translation is expected to dampen growth.

Other companies like CareFusion (CFN - Analyst Report) and Hanger (HGR - Analyst Report), carrying a Zacks Rank #2 (Buy), are expected to do well in the medical industry.

Please login to or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research


Are you a new Zacks Member or a visitor to

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
UTD THERAPE… UTHR 117.83 +28.51%
TRIQUINT SE… TQNT 20.67 +6.52%
RF MICRO DE… RFMD 12.47 +6.04%
VASCO DATA… VDSI 14.77 +4.68%
BANCO DO BR… BDORY 15.53 +3.95%