Jefferies Boosts Numbers on Covidien Following Pharmaceutical Spin-Off News (COV)

Jefferies Boosts Numbers on Covidien Following Pharmaceutical Spin-Off News (COV)


Dublin-based health care products maker Covidien plc (COV) is planning on spinning off its pharmaceutical business in mid-2013. Because of this development, analysts at Jefferies raised earnings estimates and price target on COV.

The analysts maintain a “Buy” rating on COV and see shares reaching $75, up from the previous target of $66. This valuation suggests an 11% upside to Tuesday’s closing price of $67.53.

Jefferies also raised first quarter earnings estimates for COV from $1.08 per share to $1.10 per share; fiscal 2013 earnings were raised from $4.39 per share to $4.56 per share; fiscal 2014 earnings were raised from $4.80 per share to $5.01 per share.

Covidien will spin off its pharma business to Mallinckrodt (MNK) in mid-2013. A Jefferies analyst said, “Several developments within Mallinckrodt over the next 12-24 months have the potential to drive consistent high-single overall revenue growth through F15. Specifically, we see: 1) Specialty generics generating mid double-digit growth from the recent CONCERTA launch where we see up to $300mm+ in contribution into F14; 2) Continued growth in Brands supported by the R&D pipeline; and 3) Stabilization across Global Imaging.”

“The net of our analysis is a preliminary valuation based of pre-spin COV at $75; inclusive of $68 for COV and $7 for MNK,” the analyst added.

Covidien shares were inactive during pre-market trading on Wednesday. The stock is up +24.76% over the past year.

The Bottom Line
Shares of Covidien (COV) have a dividend yield of 1.54% based on last night’s closing price of $67.53 and the company’s annualized dividend payout of $1.04 per share.

Covidien plc (COV) is not recommended at this time, holding a DARS™ Rating of 3.4 out of 5 stars.

Be sure to visit our complete recommended list of the Best Dividend Stocks, as well as a detailed explanation of our ratings system here.

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