Omnicare, Inc. OCR reported adjusted earnings per share (EPS) of 96 cents in the fourth quarter of 2014, beating the Zacks Consensus Estimate by a penny. Adjusted EPS was also 10.3% higher than the year-ago quarter.
Following the earnings release, share price of Omnicare increased nearly 1% to close at $76.74 on Feb 27.
Quarter Details
Net sales increased nearly 6% year over year to $1.63 billion, which steered ahead of the Zacks Consensus Estimate of $1.61 billion. The year-over-year upside was primarily led by strong double-digit growth at the company’s Specialty Care Group.
Net sales from the Long-Term Care (LTC) Group increased 1.4% year over year to $1.19 billion in the quarter.
From a volume perspective, Long-Term Care scripts dispensed were down 2% year over year to $27.4 million, mainly due to continued non-service related losses and a mix shifting more toward assisted living.
Specialty Care Group sales climbed 21% over the year-ago quarter to $443 million. The company benefited from certain specialty drug sourcing strategies as well as the commercialization services business, which has managed to achieve strong double-digit revenue growth for three consecutive quarters.
Gross margin contracted 160 bps to 21.8% in the reported quarter.
Selling, general and administrative (SG&A) expenses, as percentage of net sales, contracted 170 bps on a year-over-year basis to 10.7%. The decline in expenses came primarily on the back of operational efficiency.
Adjusted EBITDA from continuing operations increased 7.4% to $179.8 million in the quarter. The year-over-year growth was primarily driven by strong results in SCG and higher operating efficiencies.
Financial Outlook
Cash and cash equivalents, as of Dec 31, 2014 was $153.8 million, compared to $286.9 as of Sep 30, 2014. Long-term debt (including notes and convertible debentures) was $1.52 million as of Dec 31, 2014, compared to $1.41 at the end of the previous quarter.
2015 Guidance
Net sales for 2015 are expected in the range of $6.5–$6.7 billion, exhibiting an increase of 2%–5%. Adjusted EPS is expected in the band of $4.08–$4.16, which reflects an increase of 10%–12%. Meanwhile, cash flow from continuing operations is expected to improve 7%–27% for 2015.
Our Take
We remain impressed with the better-than-expected fourth quarter results at Omnicare. Specialty Care Group continues to be a key growth driver for the company.
We feel the expanded relationship with McKesson will further enhance Omnicare’s drug purchasing position for generic and branded drugs. Consistent operational efficiency is also a key positive for the company.
Moreover, an optimistic outlook for 2015, in our opinion, will also help boost investor confidence in the company.
Zacks Rank
Currently, Omnicare has a Zacks Rank #2 (Buy). Some other top-ranked stocks in the medical sector are Affymetrix AFFX, Luminex LMNX and Abaxis ABAX. All the three stocks sport a Zacks Rank #1 (Strong Buy).
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