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Hospira Beats Zacks Estimates

Zacks Equity Research

Hospira Inc.’s (HSP) second-quarter 2012 earnings (excluding special items) of 51 cents per share beat the Zacks Consensus Estimate of 49 cents. However, earnings fell short of the year-ago figure by 45.7%.

The reported quarter’s earnings were hurt by lower revenues and higher costs. On a reported basis (including special items), the company suffered a loss of 2 cents per share as opposed to the year-ago earnings of 85 cents.

The Lake Forest, Illinois-based company came up with revenues of $1.0 billion in the reported quarter,  beating the Zacks Consensus Estimate of $986 million. Revenues were, however, 2.9% lower than the year-ago figure due to adverse foreign currency movements and the slowdown in production at the company’s facility in Rocky Mountain, North Carolina.

Quarter in Details

The Specialty Injectable Pharmaceuticals (:SIP) business, the biggest contributor to Hospira’s revenues, performed disappointingly in the quarter with sales from the segment declining 4.6% (down 1.7% at constant currency) to $644.2 million. This segment includes generic injectables as well as proprietary specialty injectables. The SIP unit includes drugs such as the generic version of Sanofi’s (SNY) oncology therapy Taxotere.

Sales in the Medication Management (MMS) segment climbed 3.5% (up 5.7% at constant currency) to $255.1 million. Sales in the Other Pharma division declined 5.9% (down 4.4% at constant currency) to $134.0 million.

Geographically, the Americas, Europe, Middle East and Africa (:EMEA) and the Asia-Pacific (:APAC) markets contributed $810.3 million (down 2.9% at constant currency), $135.3 million (up 11.0% at constant currency) and $87.7 million (up 6.5% at constant currency), respectively, to total revenue in the reported quarter.

2012 Outlook

The company continues to expect top-line growth in the range of -1% to 2% on a constant currency basis. Foreign exchange is expected to negatively impact the top line by 1 to 2%. The company expects 2012 adjusted earnings at the low end of the projected range of $2.00–$2.30 per share. The Zacks Consensus Estimate for 2012 currently stands at $2.11 per share.

Hospira now expects cash flow from operations in the range of $475-$525 million (previous guidance: $575-$625 million) in 2012.  The company continues to expect capital expenditures in the range of $350-$400 million. Depreciation and amortization continues to be projected in the range of $240-$260 million.

Our Recommendation

We currently have a Neutral recommendation on Hospira. The stock carries a Zacks #4 Rank (Sell rating) in the short run.

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