On Jul 2, we downgraded our long-term recommendation on
) to Neutral from Outperform as we believe reimbursement pressure
and margin headwinds soured the company's positive momentum. This
provider of infusion, home healthcare and pharmacy benefit
management (PBM) services carries a Zacks Rank #3 (Hold).
Why the Downgrade?
The company's PBM business witnessed another quarter of downfall
due to lower revenue from discount cards and decreased funded PBM
business. Further, BioScrip posted sizeable margin contractions
due to escalating costs and expenses. Reimbursement cuts also
adversely affect the company's financial results.
In our view, reimbursement pressure and margin headwinds are
looming concerns for BioScrip. Further, the company operates in a
tough competitive landscape in the presence of stalwarts like
CVS Caremark Corporation
In the first quarter of 2013, BioScrip's adjusted EPS of a penny
missed the Zacks Consensus Estimate of $0.02. Moreover, losses
widened as net loss from continuing operations of $7.5 million or
a loss of 13 cents per share in the first quarter was worse than
the net loss of $2 million or 4 cents per share in the year-ago
Despite the lukewarm start to 2013, we believe that BioScrip
stands to gain from attractive market dynamics and strong
presence in the infusion business. The company's strategy of
selective acquisitions and regional expansion also boost
The recent announcement of the takeover of Ohio-based CarePoint
Partners Holdings is another upside as it is expected to improve
BioScrip's growth profile. The long-term earnings growth of
the company is presently pegged at 20.5%.
However, the dearth of any near-term catalyst warrants caution.
Other Stocks to Consider
While we remain on the sidelines for BioScrip, we are positive
) doing well. The stock carries a favorable Zacks Rank #1 (Strong
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