Goldman On Covidien's 1Q 2011 Earnings Reported This Morning

Goldman Sachs has published a research report on Covidien (NYSE: COV) after the company reported 1Q2011 EPS this morning that beat analyst estimates.

In the report, Goldman Sachs writes that "This morning, Covidien reported adjusted 1QFY2011 EPS of $0.95 (+14% yoy) vs. our estimate of $0.80 and consensus at $0.81. Total revenue of $2.769bn (+4.7% yoy/+5.0% CC) was 2.7% better than our estimates and 1.5% better than consensus. On an organic basis (ex-M&A, divestitures, and FX), we estimate revenue grew 1.3% (about 80bp better than our estimates). Upside on the top-line was compounded by higher gross margins, higher other income, and a lower tax rate. Of the $0.15 upside vs. our estimates, 80% came from operating items. Overall, we view the quality of earnings as strong in the quarter. FY2011 guidance for sales, operating margins, and cash flow is unchanged; however, a lower full year tax rate is likely to push consensus numbers to at least $3.65-3.70. To reach these numbers, EBIT margins would have to decline throughout the year despite accelerating top-line growth. We see room for upside."

Goldman Sachs maintains its Neutral rating on Covidien, which closed yesterday at $47.47.