Jefferies Raises Price Target on Covidien (COV)

Jefferies is out with a research report this morning, where it reiterates its Buy rating on Covidien COV; it has a $56.00 price target on the stock, up from $52.00. The Jefferies analysts noted that synergies, easy comparables, and significant FCF flexibility provide Covidien favorable positioning heading into FY11 despite continued concerns over lower HC utilization trends and pricing headwinds. The analysts also noted that COV's inclusion into the S&P 500 should provide a technical bounce. As for valuation, the analysts remarked, “We are raising our PT to $56 from $52 to reflect favorable positioning and achievable outlook hurdles heading into FY11, along with increased demand from pending S&P500 inclusion. Our new $56 price target is blends: 1) 16.0x forward P/E target; 2) $58 DCF; and 3) $55 sum of the parts analysis.”