Hospira Inc.’s (HSP) third quarter fiscal 2010 earnings (excluding special items) of 74 cents per share surpassed the Zacks Consensus Estimate by 5 cents. However, earnings fell well short of the year-ago earnings of 90 cents per share.
On a reported basis (including special items), the company earned 42 cents per share as opposed to the year-ago earnings of 71 cents per share. The year-over-year decline was mainly attributable to reduced sales of generic chemotherapy treatment oxaliplatin and issues regarding the Symbiq pump device.
Net sales for the quarter slipped 5.8% (down 5.6% at constant exchange rate, or CER) to $949.3 million. The year-over-year decline was mainly attributable to the temporary discontinuation of US sales of the generic version of Sanofi’s (SNY) oxaliplatin pursuant to a litigation settlement and the decline in the Medication Management Systems (MMS) segment. However, revenues were higher than the Zacks Consensus Estimate of $945 million.
Sales in the Specialty Injectable Pharmaceuticals (SIP) business slipped 3.1% (at CER) to $558.7 million. Even though performance at the SIP segment was hurt by the lower sales of oxaliplatin, Precedex, meropenem, vancomycin and heparin performed well in the quarter.
The MMS segment performed even worse. Sales slipped to $152.1 million (down 5.6%). The disappointing performance of the MMS business was attributable to Hospira’s voluntary hold on shipments of its Symbiq Infusion System to new customers.
Revenues from the Other Pharma segment declined 11.8% at CER to $137.9 million. Other Devices revenues continued to decline in the reported quarter, recording revenues of $100.6 million, down 9.6% at CER.
Geographically, during the quarter the Americas segment contributed $762.1 million (down 5.6%), Europe, Middle East and Africa (EMEA) contributed $116.2 million (down 2.5%) and Asia-Pacific (APAC) contributed $71.0 million (down 10.6%) to total revenues.
Adjusted income from operations decreased 8.6% to $189.0 million. Even though manufacturing efficiency improved as a result of the company’s Project Fuel optimization initiatives, declining sales and other headwinds more than offset the benefit.
2010 Guidance
Hospira narrowed its 2010 adjusted earnings projection . Hospira now expects adjusted earnings between $3.40 and $3.45 per share, as opposed to the prior projection of $3.35 to $3.45 per share. It forecasts sales growth between 3% and 4% on a reported basis. 2010 cash flow from operations is forecasted between $525 million and $575 million.
Our Recommendation
Even though the company carries a Zacks #2 Rank (short-term Buy rating) in the short-run, we are more cautious in the long-run and have a Neutral view on the stock.
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