) posted adjusted earnings per share of 91 cents in the first
quarter of 2014, beating the Zacks Consensus Estimate by a penny
and the year-ago level of 84 cents by 8.3%. Reported net earnings
in the quarter was $63.8 million (or 59 cents per share), up
17.3% year over year.
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OMNICARE INC (OCR): Free Stock Analysis
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Revenues in the quarter went up 7.7% to $1,571.0 million from
$1,459.0 million a year ago and were in line with the Zacks
Consensus Estimate. Revenue growth was driven by increased script
volume from new customer additions in OCR's Long-Term Care Group,
rapid growth of the Specialty Care Group and drug price
Following the earnings release, shares of the company slipped
0.4% to $58.31 till the last trading session.
Revenues from the core
Long-Term Care (LTC) Group
were $1,191 million, up 4.3% from $1,142 million in the same
period last year. Adjusted operating earnings increased 4.4% to
$162.1 million from $155.2 million a year ago. An effective sales
structure coupled with an attractive value proposition drove
revenue growth during the quarter.
Revenues from the
Specialty Care Group (SCG)
jumped 19.9% to $380.0 million from $317.0 million in the
comparable prior-year period, driven by a combination of
prescription value increases and drug price inflation. Operating
earnings of $31.7 million increased 12.8% from $28.1 million
reported a year ago.
Gross profit in the quarter rose 2.5% to $358.5 million on the
back of revenue growth. However, gross margin dipped 120 basis
points (bps) to 22.8% from 24.0% in the first quarter of 2013 due
to a revenue mix shift toward lower margin Specialty Pharmacy
business, general pricing adjustments with PDPs and other payers
as well as robust inflation of high-cost branded drugs.
Selling, general and administrative (SG&A) expenses declined
2.0% to $186.8 million due to increased efficiencies and other
standardization initiatives. As a percentage of sales, SG&A
expenses improved 120 bps to 11.9% from 13.1% in the year-ago
Adjusted depreciation and amortization (D&A) expenses were
$27.6 million for the first quarter of 2014, reflecting a 6.6%
increase over the comparable prior-year period. OCR expects
D&A expenses to increase through 2014, as a result of the
recently increased investment in the business.
Adjusted EBITDA increased 10.4% to $177.7 million in the quarter
from $160.9 million in the first quarter of 2013.
OCR ended the quarter with cash and cash equivalents of $347.0
million, down 2.5% from $356.0 million as of Dec 31, 2013.
Long-term debt (including notes and convertible debentures)
declined marginally by 0.1% to $1,417.5 million from $1,418.8
million as of Dec 31, 2013. However, long-term debt to
capitalization ratio increased 20 bps to 34.3% from 34.1% as of
Dec 31, 2013 due to a fall in shareholder's equity.
In the quarter, cash flow from operations was $171.6 million and
capital expenditures were $26.2 million. OCR repurchased 1.6
million shares for an aggregate amount of $95 million. As of Mar
31, 2014, the company had approximately $405 million worth of
shares available under its current share repurchase
OCR reaffirmed its previously announced guidance for 2014.
Adjusted earnings per share are anticipated in the range of $3.64
to $3.72, reflecting a 6 to 8% increase over 2013. The Zacks
Consensus Estimate of $3.70 lies within the guided range.
OCR expects revenues between $6.3 and $6.4 billion for 2014,
indicating a 5 to 7% rise over 2013. The Zacks Consensus Estimate
of $6.4 billion coincides with the upper end of the guided range.
Operating cash flows are expected between $475 and $550 million
for the year, excluding settlement payments.
OCR reported an earnings beat and in-line revenues for the first
quarter of 2014, with both increasing on year-over-year bases.
The company also reiterated its guidance for 2014.
OCR delivered an improved operating performance during the
quarter, driven by its ability to convert increased sales to
operating earnings as well as its strong working capital
management. Furthermore, OCR continues to make additional
investments in the business.
OCR continues to face robust inflation of high-cost branded drugs
and general pricing adjustments. However, with the rapidly
changing healthcare environment, OCR is well-positioned to
identify new opportunities and generate consistent growth.
Currently, OCR carries a Zacks Rank #2 (Buy). Some other stocks
worth a look in the medical services industry are
Envision Healthcare Holdings, Inc.
). All the three stocks carry a Zacks Rank #1 (Strong Buy).