Provider of drugs to long-term care facilities and nursing
) posted third quarter 2012 adjusted (excluding one-time
expenses) earnings per share of 86 cents surpassing the Zacks
Consensus Estimate of 80 cents.
NATL HEALTHCARE (NHC): Free Stock Analysis
OMNICARE INC (OCR): Free Stock Analysis
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Reported net income in the reported quarter more than doubled
from the year-ago quarter to $61.4 million (or 55 cents per
Net sales decreased 2.8% year over year to $1,501.3 million in
the third quarter, trailing the Zacks Consensus Estimate of
$1,536 million. The decline in the scripts volume and
introduction of lower costs generics hampered growth in
Net sales of the Long Term Care Group were $1,166 million in the
quarter, down 8% year over year. The decrease in prescription
volumes led to the decline in segment revenues. Omnicare also
initiated the restructuring of the Long Term Care segment in the
Net sales of the Specialty Care Group were $333 million, up 21.3%
year over year. Growth across all specialty platforms accounted
for the year-over year sales growth. Moreover, the segment
continues to gain from its limited distribution network for its
specialty pharmacy platform.
Gross margin improved 232 basis points year over year to 24.7% in
the third quarter. Operating margin increased 130 basis points on
a year-over-year basis to 8.9% in the quarter. Adjusted EBITDA
from continuing operations stood at $172 million, up 9.6% year
Adjusted operating income from continuing operations for Long
Term Care Group improved 10% year over to $154.4 million while
the same for Specialty Care Group jumped 25.5% to $33.2 million
in the quarter.
Balance Sheet, Cash Flow and Other
Omnicare exited the third quarter with cash and cash equivalents
of $647.4 million, down 5% year over year. Long-term debt
(including notes and convertible debentures) declined 4.1% year
over year but still remained sizeable at $2,029.7 million.
Cash flow from continuing operations climbed 17.4% year over year
to $196 million. The improvement in the company's cash position
made possible the deployment of capital to increase shareholder
value via dividend hikes and share repurchases.
Omnicare repurchased about 0.9 million shares in the third
quarter for $31 million. The company had $498 million available
under its recent share repurchase authorization, as of September
For 2012, Omnicare continues to anticipate revenues between $6.1
billion and $6.2 billion. However, the company has raised its
forecast for adjusted earnings per share (from continuing
operations) in a range of $3.30 to $3.36 compared with $3.22 to
$3.28 earlier. The upward revision was based on the branded
generic conversion wave and robust growth of the company's
Specialty Care Group.
Omnicare also increased its expected cash flows (from continuing
operations) to the range of $500 million to $550 million,
compared to the earlier range of $425 million to $525 million.
Omnicare is a market leading provider of long-term care pharmacy
services and health care environment for individuals directly and
indirectly, through subsidiaries, across North America. It
National Healthcare Corp
) in certain niche segments.
Omnicare currently retains a Zacks #3 Rank, which translates into
a short-term Hold rating. We currently have a long-term 'Neutral'
recommendation on the stock. In addition, Omnicare has shown
significant improvement in margins, attributable to new generics
introductions and cost containment efforts.
Moreover, generic launches in the next few quarters present a
major opportunity due to Omnicare's direct access to
manufacturers and current greater exposure to the institutional
pharmacy channel than in the past couple of years. Operational
synergies from the buyout of Five Star's pharmacy business are
also expected to materialize in 2013. However, the company
continues to rely on Medicare and Medicaid programs for a major
share of its revenues.