Hospira has been facing some serious manufacturing quality
concerns related its injectable drugs as well as infusion pump
systems. Its remediation efforts may be successful in the long-run
but they will hurt the bottom line in the short-run.
Further, the time frame for remediation remains uncertain and
the company may continue to lose its market share during this
In view of the cloudy outlook, investors should avoid this Zacks
Rank # 5 (Strong Sell) stock for the time being.
About the Company
Headquartered in Lake Forest, IL, Hospira is the world's leading
provider of injectable drugs and infusion technologies. Hospira was
spun off from Abbott Laboratories in 2004.
Quality Control Issues
In the last 2-3 years, the company has received several notices
from the US Food and Drug Administration (FDA) regarding quality
control issues at its Rocky Mountain facility and other facilities.
The remediation efforts are likely to be costly and time consuming.
Further, manufacturing will likely remain constrained during the
Lackluster Fourth Quarter Results
For the fourth quarter of 2012, Hospira reported earnings of
$0.55 per share, a penny above Zacks consensus estimate.
Full-year 2012 earnings were $2.01 per share,
34% below prior year earnings.
2013 Guidance Withdrawn
On February 14, 2012, Hospira disclosed in a regulatory filing
that it is withdrawing its 2013 financial guidance communicated
during the earnings call, based on the notification received from
the US Food and Drug Administration regarding import ban on
infusion pump systems from its manufacturing facility in Costa
Hospira expects the expansion of the import ban to adversely
impact its 2013 net sales by $50 to $100 million, in case the ban
stays throughout 2013.
In the last 60 days, 3 analysts have revised their quarterly
estimates downwards and 8 analysts have revised the estimates for
the full-year downwards.
The Bottom Line
The company has been making efforts to recapture its lost market
share, improve its manufacturing quality as well as expand its
presence in emerging markets. It is also trying to leverage on its
leadership position in some of the products. While these efforts
may be successful in the longer-term, the near term outlook for the
company remains murky.
HSP is currently Zacks Rank # 5 (Strong Sell) stock and it also
has a longer-term recommendation of "Underperform".
Further manufacturing issues at its Rocky Mountain facility
(which did not comply with the regulatory standards according to
FDA) and some other facilities, and FDA's import ban continue to
pose headwinds to the stock's recovery.
Given above reasons, we would advise the investors to stay away
from this stock for the time being. Investors seeking exposure to
this industry can look at some of the better peers like Conceptus
(CPTS) or Nuvasive (NUVA), both of which are ranked #2 (Buy) by
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