Covidien Profit Falls 19% on Increased Expenses

By Everdeen Mason 

Covidien PLC said its fiscal first-quarter earnings fell 19% as the company's increased expenses masked a rise in its medical-supplies sales.

Covidien--a maker of operating-room gear, generic drugs and other medical supplies--has generally seen improved revenue over the past two years on the strength of its medical-devices sales.

This year, the company is focused on expanding its product portfolio and expanding in emerging markets such as China and Brazil, said Chief Executive Jose E. Almeida. Covidien most recently agreed to buy Given Imaging Ltd., a maker of ingestible pills that take photos inside patients' bodies, last month.

For the quarter ended Dec. 27, Covidien reported earnings of $398 million, or 87 cents a share, down from $493 million, or $1.03 a share. Excluding items such as restructuring charges, per-share earnings from continuing operations rose to $1 from 97 cents.

Sales climbed 2.8% to $2.64 billion. Foreign exchange rate fluctuations lowered the quarterly sales growth rate by two percentage points.

Analysts polled by Thomson Reuters recently expected per-share earnings of 94 cents on sales of $2.6 billion.

Sales in the medical-devices business, its largest by revenue, rose 3.2% to $2.25 billion. Medical-supplies increased to $388 million from $385 million.

Research and development expenses rose 13% to $125 million, while income tax expense jumped 24% to $115 million.

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