COV To Enjoy Significant Margin Expansion

Analyst Matthew J Dodds of Citi Investment Research & Analysis maintains his "buy" rating on Covidien Ltd (NYSE: COV), while raising his estimates for the company. The target price for COV has been raised from $53 to $56.

According to Citi Investment Research & Analysis, Covidien’s gross margins and operating margins are expected to increase significantly in the forthcoming quarters, driven by the strength in the general surgery market and acquisitions and divestitures. Despite the weak macroeconomic trends, the general surgery market remains robust, the analyst said.

The market under-appreciate the positive effects of Covidien’s recent acquisitions and divestitures, the analyst added. Citi Investment Research & Analysis has raised its EPS estimates for 2010 and 2011 from $3.28 to $3.29 and from $3.60 to $3.70, respectively.