Kline, Paulsen Won’t Like Covidien CEO’s Comment

Wonder why Paul Ryan in smiling ? (read below)

Yet, John Kline and Erik Paulsen may not like what the CEO of Covidien told investors last week …. You may remember the tweet from John Kline after he visited their facility

Yes, that dreaded Medical Device Tax that Erik Paulsen is basing his re-election on (as tweeted earlier this month)

So, maybe it’s time to look at the news from the Medical Device industry … since they have been paying the tax for almost 15 months ….

Did you see the press release on Covidien’s last quarter ?

Covidien quarterly sales up 3% to $2.6 billion

Ireland’s Covidien posted 3% sales growth in the second quarter of its fiscal 2014, beating out the $2.53 billion it made in the same period last year.
“As we continue to invest in and execute our global strategy, we are seeing results in line with our year-to-date expectations,” Covidien ($COV) CEO José Almeida said in a statement. “With the impact of the medical device tax annualized and, at today’s rates, the majority of the negative currency impact behind us, we expect the company to return to double-digit EPS growth, possibly as soon as the third quarter.”

Another company that Representative Paulsen likes to fear-monger about job losses also reported :

Stryker’s sales jump

Stryker’s ($SYK) net sales grew by 5.3% in the first quarter of 2014 compared to the prior to $2.3 billion.
The reconstructive unit reported sales of $999 million and grew by 4.5%, while medsurg reported 5.8% growth to $886 million and neurotechnology and spine grew by 5.9% to $420 million. Currency fluctuations reduced sales growth by at least one percentage point in all three divisions, according to the earnings release.

Gosh, it looks like at least those two companies have figured out how to survive despite the onerous 2.3% Medical Device EXCISE Tax (which some have passed on to consumers and others have absorbed.)

Yet, that wasn’t the biggest news out of the medical device industry

Zimmer-Biomet: Merger, Valued at $13.35 Billion, Combines Two Medical-Device Makers

WARSAW, Ind.—A $13.35 billion deal to combine two medical-device makers was big news on Wall Street Thursday—
The Zimmer-Biomet merger is the largest in the medical-devices industry since Johnson & Johnson purchased Synthes Inc. for $21.3 billion in 2012, and highlights the desire of device companies to cut costs and become more efficient in the face of pricing pressure from hospitals, combined with lower surgical-procedure volumes because of consumer uncertainty about the economy, analysts said.
Zimmer’s CEO David Dvorak said the combined firm would go through a “methodical planning process” to “retain the best talent in both organizations.” He said the merged company would “work very hard” to maintain its sales employees and skilled production workers, but said there would likely be opportunities to reduce costs in other areas. Zimmer said it expects to realize cost synergies of $270 million annually by the third year after closing.
Sam Lozier, a robotic finisher at Zimmer—”I polish knees,” he said—was cleaning his thick wire-rimmed eyeglasses in the driver’s seat of his red Chevy pickup in Zimmer’s parking lot Thursday, about to start his shift. “I like my job. I’m very well paid,” he said. To him, the purchase of Biomet means “we’re still growing, and that’s a good thing,” he said. There is always concern among employees of outsourcing jobs, but the purchase of Biomet “isn’t going to make that big a difference,” he said.
Mr. Lozier’s brother works at Biomet, and his son works at DePuy. “If you live in Warsaw, someone in the family is going to work at one of them,” he said.

Zimmer ZMH shares were up more than 11% to $101.84, on track to set a closing record. They hit an intraday high of $108.33.
Wall Street loved the idea, with analyst Mike Matson of Needham & Co. calling the transaction a “home run”.
“With consolidation happening across the healthcare industry, management teams seem to believe bigger is better. Bigger med-tech firms have cost advantages and are able to bundle products putting smaller companies (particularly those undifferentiated technologies) at a disadvantage,” Matson said.
Leerink Research’s Richard Newitter said the deal creates a “heavyweight” in the orthopedics space, saying that “we believe investors were itching for Zimmer to use its balance sheet and to make a large strategic move like this and that the announcement will be viewed favorably by consensus” in his note.
Of course, it didn’t hurt that Zimmer management says the deal should be accretive to earnings by double digits in the first year after the deal closes.
Zimmer also reported earnings for the quarter that were slightly ahead of estimates.

Why is Paul Ryan smiling … Paul Ryan has listed Zimmer Holdings as one of his investments on his past Personal Financial Disclosure filings.

Yes, in the future there may be some manpower reductions … but this is normal when businesses combine … and no one seems to be concerned that the “onerous” 2.3% EXCISE tax is going to kill the industry.

OK, so the Medical Device industry seems to be okay …. What about the Insurance industry ?

What Obamacare problems?

Aetna results not showing any ill effects

Reporting its first-quarter earnings Thursday, Aetna AET posted better-than-expected earnings and raised forecasts for the year, saying it has taken pricing actions in order to recover fees and taxes emanating from the Affordable Care Act.
As a result, the Hartford, Conn.-based carrier’s shares jumped more than 7% at one point in early action and were up nearly 5% in recent deals to $72.21.

Earlier this week, Centene Corp. CNC also shrugged off the effects of Obamacare and higher drug costs to post earnings that were nearly double that of analyst forecasts.

Erik Paulsen may like to advertise himself as a “Math Guy” but I would not take any stock tips from him … ‘cause all he sees is horrors … but smart investors ( “Budget Guy”) knows how to make money.

Tags: , , ,