) fourth quarter 2011 adjusted earnings of 51 cents per share fell
short of the year-ago adjusted earnings by 26 cents. Earnings were
hurt by the slowdown in production at the company's facility in
Rocky Mountain, North Carolina, which accounts for approximately
25% of the overall net sales. Earnings however got the better of
the Zacks Consensus Estimate of 45 cents due to
higher-than-forecast top-line results.
The company came up with revenues of $1.0 billion, up 2.2% over
the prior-year quarter and also beating the Zacks Consensus
Estimate of $954 million. The year-over-year improvement was driven
by strong performance of the Specialty Injectable Pharmaceuticals
(SIP) segment despite production slowdown at the Rocky Mountain
In 2011, Hospira reported total revenue of $4.1 billion, up 3.6%
over 2010 levels. In 2011, adjusted earnings per share were $3.04
versus $3.31 per share in 2010. The Zacks Consensus Estimates were
$4.0 billion for revenue and $2.98 for earnings per share.
Quarter in Detail
The SIP business performed well in the quarter with sales from
the segment climbing 2.8% to $621.9 million, driven particularly by
the strong performance of the generic version of
) Taxotere. Medication Management Systems (
) sales improved 3.1% to $260.0 million. Sales in the Other Pharma
division declined 2.1% to $132.1 million in the fourth quarter of
Geographically, the Americas, Europe, Middle East and Africa
(EMEA) and the Asia-Pacific (APAC) markets contributed $786.6
million (up 1.0%), $133.5 million (up 3.5%) and $93.9 million (up
11.5%), respectively, to total revenue during the reported
Fourth quarter adjusted income from operations was $111 million,
down 21.8% over the prior-year quarter. The decline was
attributable to inventory losses and costs incurred due to quality
actions undertaken in response to the FDA warning letter received
in April 2010.
In addition to announcing the fourth quarter and 2011 financial
results, Hospira management also introduced 2012 guidance.
In 2012, Hospira expects top-line growth in the range of -1% to
2% on a constant currency basis. Additionally foreign exchange is
expected to have a negative impact of 1% on the top line. Adjusted
earnings are expected in a band of $2.00-$2.30, down from 2011
levels due to the ongoing quality control issues with the company.
Increased research and development activities, in a bid to expand
its product portfolio, are also expected to bring down earnings
this year. The earnings guidance assumes that productivity levels
at the Rocky Mountain facility will improve in the second half of
2012. The current Zacks Consensus Earnings Estimate of $2.42 per
share is above the company's guidance range.
Hospira expects cash flow from operations in the range of $575
million to $625 million in 2012. Capital expenditures are expected
in the range of $350 million to $400 million. Depreciation and
amortization is expected in the range of $240 million to $260
We currently have an Underperform recommendation on Hospira. The
stock carries a Zacks #5 Rank (short-term 'Strong Sell'
Hospira is going through a rough patch due to manufacturing and
customer service related issues at its Rocky Mountain facility.
Rocky Mountain is currently operating much below normalized levels.
Though the possibility is remote, we cannot completely rule out
shutdown of the Rocky Mountain facility, which could be devastating
for Hospira. Moreover, the Symbiq and Plum pump issues remain
matters of lingering concern.
HOSPIRA INC (
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