Omnicare (OCR) Q1 Earnings, Sales Top Estimates; Rise Y/Y - Analyst Blog

Omnicare, Inc.OCR reported adjusted earnings per share (EPS) of $1.02 in the first quarter of 2015, beating the Zacks Consensus Estimate by a couple of cents. Adjusted EPS also increased 12.1% on a year-over-year basis. The upside was primarily driven by growth in net sales coupled with operating efficiency.

Omnicare Inc. - Earnings Surprise | FindTheCompany

Quarter Details

Net sales increased 5.7% year over year to $1.65 billion, which steered ahead of the Zacks Consensus Estimate of $1.62 billion. The year-over-year upside was primarily led by strong double-digit growth at the company's Specialty Care Group.

Net sales from the Long-Term Care (LTC) Group inched up 0.3% year over year to $1.19 billion. The trends for prescription volumes improved in the reported quarter, driven partially by the benefits of the recent changes to the company's account management structure.

Specialty Care Group sales climbed 22.5% over the year-ago quarter to $465 million. The demand for the company's diversified platforms under the Specialty Care Group has been particularly high. The specialty pharmacy business experienced a 48% year-over-year growth in physician referrals and a 14% increase in average patient volumes.

Gross margin contracted 180 basis points (bps) to 21.1% in the reported quarter, driven primarily by a mix shift in the company's sales and the impact of price increases on lower margin branded drugs.

Selling, general and administrative (SG&A) expenses, as percentage of net sales, contracted 180 bps on a year-over-year basis to 10.1%. The decline in expenses came primarily on the back of operational efficiency.

Adjusted EBITDA from continuing operations increased 6.9% to $190 million in the quarter. The year-over-year growth was primarily driven by strong results in SCG and higher operating efficiencies.

Cash and cash equivalents, as of Mar 31, 2015, were $322.5 million, compared with $153.8 as of Dec 31, 2014. Long-term debt (including notes and convertible debentures) was $1.51 million as of Mar 31, 2015, compared with $1.52 at the end of the previous quarter.

2015 Guidance

Buoyed by solid first-quarter results, management increased the lower end of its cash flow guidance range, while reaffirming other elements of the previously provided outlook. Net sales for 2015 are expected in the range of $6.5-$6.7 billion, exhibiting an increase of 2-5%. Adjusted EPS is estimated in the band of $4.08-$4.16, which reflects a jump of 10-12%. Management expects cash flow from operations in the range of $550-$625 million, compared with the previously guided range of $525-$625 million.

Our Take

We are impressed with the better-than-expected first quarter results at Omnicare. Specialty Care Group continues to be a key growth driver for the company.

We are also encouraged by the continued operating efficiency, which has significantly boosted bottom-line growth. Moreover, an optimistic outlook for 2015, in our opinion, should help boost investor confidence further in the stock.

Zacks Rank

Currently, Omnicare has a Zacks Rank #2 (Buy). Other top-ranked stocks in the medical sector are LeMaitre Vascular LMAT , SurModics SRDX and Capricor Therapeutics CAPR . While LeMaitre Vascular and Capricor Therapeutics hold the same Zacks Rank as Omnicare, SurModics sports a Zacks Rank #1 (Strong Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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