Hospira Inc. (HSP) is set to report fourth-quarter 2014 results on Feb 12 before the market opens. Hospira’s earnings track record has been pretty good – last quarter, the company delivered a positive earnings surprise of 39.62%. Hospira has posted a positive earnings surprise in each of the trailing four quarters with an average beat of 23.16%. Let's see how things are shaping up for this announcement.
Will Generic Competition for Precedex Hamper Sales?
Earnings are expected to be down in the fourth quarter, both sequentially as well as year over year, primarily due to the negative impact of genericization of Precedex. The company had witnessed a higher demand for its premix product and wholesaler stocking in the third quarter, which could have pulled some of the expected fourth quarter sales into the third quarter. Additionally, research and development (R&D) spending is expected to be at its highest in the fourth quarter, which could also pull down earnings. The company projects adjusted 2014 earnings per share in the range of $2.40 to $2.50.
Hospira expects net sales growth to be between 8.5% and 9.5% on a constant currency basis with no material impact expected from foreign currency in 2014.
Meanwhile, the focus would remain on the Pfizer (PFE) – Hospira deal. Pfizer is set to buy Hospira in a cash transaction valued at about $17 billion or $90 per share. The offer price represents a significant premium (39%) over Hospira’s Feb 4 closing price. The deal is expected to close in the second half of the year (read more: Pfizer Set to Acquire Hospira for $17B, Shares Up).
Earnings Whispers?
Our proven model does not conclusively show that Hospira is likely to beat the Zacks Consensus Estimate in the fourth quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 for this to happen. Unfortunately, this is not the case here, as elaborated below.
Negative Zacks ESP: Earnings ESP for Hospira is -12.2%. This is because the Most Accurate estimate stands at 36 cents while the Zacks Consensus Estimate is higher at 41 cents.
Zacks Rank: Hospira’s Zacks Rank #3 (Hold) when combined with a negative ESP makes surprise prediction difficult.
We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks That Warrant a Look
Here are some health care stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter.
Acorda Therapeutics, Inc. (ACOR) has an Earnings ESP of +106.67% and a Zacks Rank #3 (Hold). The company is expected to release results on Feb 12.
Actavis (ACT) has an earnings ESP of +4.38% and carries a Zacks Rank #2 (Buy). The company is expected to release fourth-quarter 2014 results on Feb 18.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment