Hospira Inc.'s (HSP) third quarter preliminary results were below expectations due to continued manufacturing problems at the company's Rocky Mountain facility. The facility is expected to continue functioning below full capacity through the remainder of 2011. The additional costs for manufacturing remediation resulted in lost sales, inventory loss and lower service levels.
In addition, management cut its 2011 adjusted earnings guidance to $2.95-$3.05 from $3.90-$4.00. We have slashed our 2011 earnings estimate from $3.93 to $3.01 and our 2012 estimates from $4.47 to $2.85, in line with management's action.
Moreover, the Symbiq and Plum pump issues remain matters of concern. We have, therefore, downgraded our rating on Hospira from Neutral to Underperform.
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