Zacks_Analysts' Blog : Tough Quarter for Hospira - Analyst Blog

Hospira Inc.’s (HSP) third quarter 2011 adjusted earnings of 66 cents per share fell short of the year-ago adjusted earnings by 8 cents. Earnings were in line with the Zacks Consensus Estimate. Earnings were hurt by the slowdown in production at the company’s facility in Rocky Mountain, North Carolina.



The Lake Forest, Illinois based company came up with revenues of $976.7 million in the reported quarter, missing the Zacks Consensus Estimate by $19.3 million. Revenues were however 2.9% higher than the year ago figure of $949.3 million. The year-over-year improvement was driven by driven by strong US sales of the generic version of Sanofi Aventis’ (SNY) cancer drug Taxotere (docetaxel).



Quarter in Detail



The Specialty Injectable Pharmaceuticals (SIP) business performed well in the quarter with sales from the segment climbing 12.2% to $626.8 million. The Medication Management (MMS) segment was weak during the quarter with sales plummeting 4.8% to $240.6 million. Sales in the Other Pharma division declined 20.7% to $109.3 million in the third quarter of 2011.



Geographically, the Americas, Europe, Middle East and Africa (EMEA) and the Asia-Pacific (APAC) markets contributed $767.9 million (up 0.8%), $129.3 million (up 11.3%) and $79.5 million (up 12.0%) respectively to total revenues during the reported quarter.



2011 Guidance



Apart from reporting disappointing third quarter numbers, Hospira reaffirmed its 2011 adjusted earnings guidance to $2.95-$3.05 provided while releasing preliminary third quarter results last week. The Zacks Consensus Estimate for 2011, revised downwards following the release of the preliminary third quarter results, currently stands at $3.01.



Hospira expects cash flow from operations in the range of $350 million-$400 million in 2011.  Capital expenditures are expected in the range of $325 million-$350 million. Depreciation and amortization is expected in the range of $230 million-$250 million.



Our Take & Recommendation



The below-par third quarter results does surprise us since we had got a taste of things to come through the disappointing third quarter preliminary results released last week. (Please read our detailed coverage of the preliminary third quarter results at Hospira Trims Outlook).



We had downgraded our long-term recommendation on Hospira to Underperform from Neutral following the disappointing third quarter preliminary results released by the company. The weak third quarter showing fully justifies our decision. The shares of Hospira carry a Zacks #5 Rank (Strong Sell) in the short-run.
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