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We expect major healthcare company, Covidien plc (COV - Analyst Report) to beat expectations when it reports second-quarter fiscal 2013 results on Apr 26.

Why a Likely Positive Surprise?

Our proven model shows that Covidien is likely to beat earnings because it has the right combination of two key ingredients.

Positive Zacks ESP: Earnings ESP (Read: Zacks Earnings ESP: A Better Method), which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is at +0.91%. This is a very meaningful and leading indicator of a likely positive earnings surprise for shares.

Zacks Rank #3 (Hold): Covidien has a Zacks Rank #3 (Hold). Note that stocks with Zacks Ranks of #1, #2 and #3 have a significantly higher chance of beating earnings. The sell rated stocks (#4 and #5) should never be considered going into an earnings announcement.  

The combination of Covidien’s Zacks Rank #3 (Hold) and +0.91% ESP makes us very confident in looking for a positive earnings beat on Apr 26.

What is Driving the Better Than Expected Earnings?

A host of factors such as solid top-line growth on the back of acquisitions (focused on emerging markets) and new offerings along with a share repurchase program are expected to lead to a positive earnings surprise in the upcoming quarter.

The positive trend is seen in the trailing four-quarter average surprise of 2.16%, which was greatly helped by the 3.77% surprise in the last-reported quarter. This was mainly due to an efficient management team capable of delivering solid results despite a difficult Medtech space.

Other Stocks to Consider

Here are some other companies that may be considered as our model shows they have the right ingredients to post an earnings beat this quarter:

Coventry Health Care Inc. , Earnings ESP of +3.80% and a Zacks Rank #2 (Buy)

Hanger Inc. (HGR - Analyst Report), Earnings ESP of +8.00% and Zacks Rank #3 (Hold)

Haemonetics Corporation (HAE - Analyst Report), Earnings ESP of +2.17% and a Zacks Rank #3 (Hold)

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