Large-cap medical technologies company, Covidien plc. is expanding the production of its Kangaroo ePump and the Kangaroo Joey enteral feeding pumps and sets. Following the announcement made by Abbott Nutrition, a division of Abbott Laboratories (ABT - Free Report) , to discontinue sale of all its enteral feeding pumps and sets in North America, the company increased its inventory in the U.S.
The expansion of the Kangaroo brand under Covidien’s nursing care products should boost growth of the Medical Supplies segment. The Medical Supplies segment has been underperforming due to lower product sales. We believe that the exit of the competitor will likely allow Covidien gain market share and surpass its flat year-over-year revenue guidance for fiscal 2013.
The market leading Kangaroo enteral feeding pumps are used to monitor the timing as well as the amount of nutrition delivered directly into a patient’s digestive tract, who is unable to intake food orally.
The Kangaroo ePump and the Kangaroo Joey are the latest offerings from the Kangaroo brand, which has been a trusted name in enteral feeding for over 30 years. Both the products are highly advanced, yet user-friendly, with subtle differences to suit patient and care givers needs.
Covidien, with a market-cap of $27.10 billion, is a leading global health care products company with an impressive history of developing and manufacturing high-quality products in a cost-effective manner. The company has a well diversified product and technology portfolio.
However, Covidien faces stiff competition and remains exposed to pricing, utilization headwinds along with acquisition risks. We remain concerned about the tepid health services industry amid a soft European economy. Also, foreign exchange translation is expected to dampen sales growth.
We currently have a long-term ‘Neutral’ recommendation on the stock, which carries a short-term Zacks #3 Rank (Hold).