Morgan Stanley Overweight On Covidien

Morgan Stanley is out with a research report on Covidien COV and it has an Overweight rating and a $63 price target on shares. In a note to clients, Morgan Stanley writes, "Our recent thesis in our May 12 report, Three New Ways to Drive the Multiple; Raising Price Target, suggested that organic acceleration, increasing shareholder returns, and pharma asset divestiture/spin were the keys to narrowing the 150 bps P/E gap. FY3Q11 delivered on two of these components, including a ~200 bps comp adjusted organic acceleration and a $275mn buyback in the quarter. Concerns around Covidien's EPS volatility may have been justified in FY10, but four-quarters of above-consensus performance should begin to erase those fears. If these trends continue, which we expect, we view P/E expansion as likely on a consensus EPS number that will continue to trend higher." Shares of COV gained $1.83 yesterday to close at $52.08.