Omnicare Unit Gets Accreditation but Shares Fall

Zacks

Omnicare Inc. (OCR), a provider of comprehensive pharmaceutical services, announced that its Advanced Care Scripts (ACS.V), a division of Omnicare Specialty Care Group (SCG) was awarded Specialty Pharmacy Accreditation from URAC, a Washington, DC-based health care accrediting organization.

However, following this announcement, shares dropped 0.6% till the last closing session. Shares of OCR have been on a downtrend since the announcement of its lower-than-expected earnings on Feb 19, 2014.

Adding to the downside, credit rating agency Moody's Investors Service downgraded its outlook on OCR to negative from stable. It also lowered OCR’s speculative grade liquidity rating to SGL-4 from SGL-1.

The most crucial factor behind the downgrade was the conversion threshold being met for over $800 million of OCR’s convertibles bonds, the par value which must be settled in cash if converted, thus weakening the company’s liquidity position.

URAC Accreditation

URAC, formerly known as Utilization Review Accreditation Commission, is an independent, nonprofit organization that offers the only third-party, voluntary accreditation program for the pharmacy benefit management and prescription services industries.

URAC`s Specialty Pharmacy Accreditation, awarded to ACS, provides an external validation of excellence in Specialty Pharmacy Management and provides Continuous Quality Improvement (:CQI) oriented processes that improve operations and enhance compliance. It also assists in preparing for regulatory compliance.

Our Take

OCR has been witnessing falling earnings estimates for 2014 over the last 60 days as its earnings and revenue failed to meet the Zacks Consensus Estimate. Over the last 60 days, six estimates were revised downward for 2014 with no upward revision over the same period, sinking the Zacks Consensus Estimate by 6.3% to $3.69 per share. The company delivered a negative earnings surprise of 3.3% in the last reported quarter.

For the fourth-quarter of 2013, OCR posted an 8.75% rise in adjusted net earnings per share to 87 cents from 80 cents in the year-ago quarter but fell short of the Zacks Consensus Estimate by 3 cents. Revenues in the quarter went up about 5.1% to $1,536.2 million but missed the Zacks Consensus Estimate of $1,589 million.

OCR currently has a Zacks Rank #4 (Sell). Some better-ranked stocks in the medical services industry include Envision Healthcare Holdings, Inc. (EVHC), Quintiles Transnational Holdings Inc. (Q), and ICON Public Limited Company (ICLR). All the three stocks sport a Zacks Rank #1 (Strong Buy).
 

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