CHICAGO (Reuters) - Bermuda-based Covidien Ltd said yesterday quarterly earnings rose as strong sales at its imaging solutions and medical devices businesses outweighed weakness in other units and an increase in spending, sending shares up by as much as 4.3 percent.

The health-care products company, spun off from Tyco International in July 2007, whose offices are on Front Street, said net income in its first fiscal quarter ended December 28, was $420 million, or 84 cents a share, compared with a year-ago profit of $338 million, or 68 cents a share.

Excluding items, Covidien earned 59 cents a share, matching the average Wall Street estimate, according to Reuters Estimates.

Sales rose nine percent to $2.3 billion in the quarter, helped by the weaker dollar, which makes US exports cheaper overseas.

Among business units, medical device sales rose 11 percent to $1.6 billion and sales of imaging solutions jumped 14 percent to $291 million, but sales of pharmaceutical products and medical supplies each dipped two percent.

David Katz, chief investment officer at Matrix Asset Advisors said he was pleased with the company's top-line growth in its core businesses.

Katz's fund owns Covidien shares based on his view that the shares are undervalued. As a group, medical device companies trade around 20 times earnings and Covidien trades in the mid-teens times normalised earnings, he noted.

The shares rose $1.10, or about 2.6 percent, to $43.96 in midday New York Stock Exchange trade as the broad market remained weak. Covidien also said it plans to sell its specialty chemicals business, which recorded sales of $422 million in fiscal 2007 and were included in its Pharmaceutical Products segment.

It plans to sell its European incontinence business, headquartered in Lille, France. Formerly part of Covidien's medical supplies segment, the business had sales of $109 million in fiscal 2007.

In December, it said it would sell its underperforming Retail Products segment. "Our decision to discontinue these businesses is consistent with our strategy to focus the portfolio and reallocate resources to core health-care businesses," CEO Richard Meelia said.