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Omnicare Raises Dividend, Approves Share Repurchase

Zacks Equity Research

Omnicare Inc. (OCR) raised its quarterly dividend payment by nearly 43% to 20 cents per share from 14 cents per share. The increased dividend is payable on Dec 24 to shareholders of record as of Dec 16.

OCR believes in a consistent dividend payment policy with raises every year. Last year, the company has raised its dividend by 100% to 14 cents.

Apart from the dividend hike, Omnicare’s board of directors approved the repurchase of additional $500 million shares of its common stock until Dec 31, 2015. This is because the company has completed its previous $350 million repurchase program, authorized on Sep 12, 2012.

Year-to-date, OCR has repurchased 4.2 million shares for $220 million. This has brought the cumulative share repurchase amount to 23.4 million shares at an aggregate cost of $849.7 million since the inception of the program on May 3, 2010.

Following the announcements of dividend hike and share repurchase, OCR hit a new 52-week high of $59.13 on Dec 5. The stock closed at $58.81 on Friday, up 1.0% from a day before.

Omnicare, a Zacks Rank #3 (Hold) stock, posted third-quarter 2013 adjusted earnings per share of 91 cents, surpassing the Zacks Consensus Estimate by a penny as well as the year-ago earnings of 86 cents.

However, the company reported a net loss (including extraordinary and one-time items) of $66.3 million or 65 cents per share, compared with a net profit of $61.4 million or 55 cents in the year-ago period. The downside was mainly on account of a litigation charge of $120 million paid in favor of a voluntary civil settlement.

Net revenues grew 5.3% year over year to $1,581 million in the third quarter, beating the Zacks Consensus Estimate of $1,552 million. Strong gains in the Specialty Care Group (SCG) coupled with continued sales and service efforts in the larger Long-Term Care Group (LTC) helped offset soft results in the hospice pharmacy business (now a part of the LTC Group).

Omnicare narrowed its revenue guidance range for 2013 to $6.2–$6.3 billion from $6.1–$6.3 billion. The Zacks Consensus Estimate for the full year is pegged at $6.3 billion, which coincides with the top end of the guided range.

Adjusted earnings per share are now expected in the range of $3.60 to $3.62 as compared with the earlier guided range of $3.56 to $3.64. The Zacks Consensus Estimate for the full year is pegged at $3.61, which stands at the mid-point of the guided range.

Few better-ranked stocks that are performing well in the medical services industry include Air Methods Corp. (AIRM), BG Medicine, Inc. (BGMD), and Envision Healthcare Holdings, Inc. (EVHC). Air Methods carries a Zacks Rank #1 (Strong Buy), while both BG Medicine and Envision Healthcare carry a Zacks Rank #2 (Buy).

Read the Full Research Report on OCR
Read the Full Research Report on BGMD
Read the Full Research Report on AIRM
Read the Full Research Report on EVHC

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