Provider of drugs to long-term care facilities and nursing
) posted second quarter 2013 adjusted (excluding one-time
expenses) earnings per share of 90 cents. The result surpassed
the Zacks Consensus Estimate of 87 cents as well as the year-ago
earnings of 83 cents.
Reported net income, which includes extraordinary and one-time
items, in the quarter was $52.2 million (or 48 cents per share),
up 179.1% year over year.
During the reported quarter, the company disposed certain assets
of its non-performing Medical Supply Services business for $28.8
Net sales increased 2.2% year over year to almost $1,570 million
in the second quarter, beating the Zacks Consensus Estimate of
Effective from the second quarter, the company began to report
its hospice pharmacy business under the Long-Term Care Group
(LTC). Net sales of the LTC Group were $1,222 million in the
quarter, down 2.6% year over year. The sequential improvement
reflects higher sales of low-cost generic drugs in the market. We
note that this was the first quarter in the last six, during
which Omnicare recorded net organic bed growth.
Net sales of the Specialty Care Group (SCG) jumped 25% to $347
million. This was driven by the company's specialty pharmacy
Gross margin improved 20 basis points (bps) year over year to
24.1% in the second quarter. Adjusted operating margin (excluding
one-time items) increased 30 basis points on a year-over-year
basis to 11.1% in the quarter.
Adjusted operating income from continuing operations for LTC
Group grew 4.4% year over to $165.1 million, while the same for
Specialty Care Group jumped 21.6% to $29.9 million in the
Balance Sheet, Cash Flow and Other
Omnicare exited the second quarter with cash and cash equivalents
of $535.4 million, down 5.2% year over year. Long-term debt
(including notes and convertible debentures) declined 21.4% year
over year to $1,591.5 million.
Omnicare raised its guidance for 2013 based on the company's
strong results in the first half of the year. For 2013, Omnicare
anticipates revenues between $6.1 billion and $6.3 billion
(earlier $6.1 billion-$6.2 billion). The Zacks Consensus Estimate
for the full year is pegged at $6.2 billion, which lies within
the guided range.
Adjusted earnings per share (from continuing operations) are
expected in a range of $3.56 to $3.64 (earlier $3.47 to $3.57).
The Zacks Consensus Estimate for the full year is pegged at
$3.57, which stands at the lower end of the guided range.
Omnicare also raised its expected cash flow (from continuing
operations) to the range of $475 million to $525 million from
We are impressed with the encouraging second-quarter results and
the raised guidance for 2013. The sequential improvement in the
LTC Group, Omnicare's mainstay, and double-digit growth in SCG
should propel revenue growth in the future. Omnicare has shown
modest improvement in margins, attributable to the introduction
of new generics 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. However, the
company continues to rely on Medicare and Medicaid programs for a
major share of its revenues.
The stock carries a Zacks Rank #2 (Buy). Other healthcare stocks
Express Scripts Holding
) are worth considering. HWAY and MDAS carry a Zacks Rank #1
(Strong Buy), while ESRX carries a Zacks Rank #2 (Buy).
EXPRESS SCRIPTS (ESRX): Free Stock Analysis
HEALTHWAYS INC (HWAY): Free Stock Analysis
MEDASSETS INC (MDAS): Free Stock Analysis
OMNICARE INC (OCR): Free Stock Analysis
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