Morgan Keegan Gives Earnings Preview On Hospital Supplies Industry

Calendar first-quarter earnings for the hospital supplies group are scheduled to kick-off on April 19th. Going into earnings, Morgan Keegan's favorite long idea is Covidien COV with the potential for EPS upside due to improving margins and positive commentary that surgical procedures growth is continuing to improve. Conversely, Morgan Keegan notes that there could be some risk to shares of Intuitive Surgical ISRG. Although it expect the company to deliver solid results, it not might be enough to propel the stock higher given the 14% increase in the stock over the past month. Morgan Keegan sees cross-currents for sales in the calendar first-quarter with some limited disruption from the earthquake in Japan and a slightly negative FX impact offset by modest growth in surgical procedures. Given the uninspiring surgical volumes in 2010, investors are likely to be highly focused on management comments regarding the outlook for the rest of 2011. Morgan Keegan's investment thesis for the group remains predicated on surgical volumes witnessing an improvement in the second-half of 2011 as unemployment slowly recovers and tough comparisons from exogenous factors ease. Covidien closed Tuesday at $52.48 ISRG closed Tuesday at $366.39