Morgan Keegan's Favorite Ideas in the Hospital Supplies Group: Baxter, Covidien, and Hill-Rom

Calendar second-quarter earnings for the hospital supplies group are scheduled to kick-off on July 19th, Morgan Keegan reports.

“Going into earnings, our favorite long ideas are Outperform rated Baxter (NYSE: BAX) ($70 PT) and Covidien (NYSE: COV) ($63 PT), and Market Perform rated Hill-Rom Holdings, Inc. (NYSE: HRC) ($48 PT),” Morgan Keegan writes.

“In our opinion, Baxter has potential for EPS upside due to improving margins and solid top-line growth. For Covidien, we expect stable surgical procedure volumes, share repurchase, and positive FX to provide above consensus EPS. For Hill-Rom, we believe that operating margin guidance was conservative for the 2H, which leaves room for upside to EPS, an increase in 2011 guidance, and a trading opportunity in the shares.”

Baxter closed Monday at $59.88; Hill-Rom closed at $45.08; Covidien closed at $52.29.