Hospira Inc.’s (HSP) second quarter 2011 adjusted earnings of 94 cents per share handsomely beat the Zacks Consensus Estimate of 77 cents. Earnings also surpassed the year-ago adjusted earnings of 86 cents. Earnings in the second quarter of 2011 benefited from an increase in revenues.
Revenues in the reported quarter came in at approximately $1.1 billion, up 9.9%. Revenues breezed past the Zacks Consensus Estimate of $968 million. The top line was boosted by strong performance of the Specialty Injectable Pharmaceuticals (SIP) business.
The Quarter in Detail
Sales in the SIP business were up 17.5% from the prior year to $675.2 million driven by strong US sales of the generic version of Sanofi Aventis’ (SNY) cancer drug Taxotere and other newly launched drugs.
The Medication Management (MMS) segment was weak during the quarter with sales increasing only 0.9% to $246.5 million. Sales in the Other Pharma division declined 4.8% to $142.4 million in the second quarter of 2011.
Geographically, the Americas, Europe, Middle East and Africa (EMEA) and the Asia-Pacific (APAC) markets contributed $843.1 million (up 7.9%), $134.6 million (up 11.4%) and $86.4 million (up 30.3%) respectively to total revenues during the reported quarter.
2011 Projection
Apart from disclosing financial results, Hospira also provided guidance for 2011. Hospira expects 2011 revenues to grow in the range of 7–9% on a constant currency basis (old guidance: 5–7%). Foreign exchange is expected to have a positive impact of 2% on 2011 revenues.
In spite of expecting strong revenue growth, Hospira maintained its 2011 adjusted earnings guidance. The company believes that sales growth will be offset by weakness in gross margin.
Consequently, Hospira continues to expect 2011 adjusted earnings between $3.90 and $4.00 per share, representing growth in the range of 18–21% year over year. The 2011 Zacks Consensus Estimate of $3.97 per share is towards the higher end of the guidance range.
2011 cash flow from operations is forecast between $650 million and $700 million. Capital expenditures are expected in the range of $375 million to $400 million. Depreciation and amortization is expected in the range of $230 million-$250 million for 2011.
Share Repurchase Program
In the second quarter of 2011 Hospira entered into an accelerated share repurchase (ASR) program under its $1 billion share buyback authorization. Hospira bought back 3.7 million shares for $200 million.
Our Recommendation
Currently, we have a Neutral recommendation on Hospira. The shares of Hospira carry a Zacks #3 Rank (Hold) in the short-run. We are positive on Hospira’s expanding biosimilar portfolio and strong pipeline. However, the Symbiq pump issues and the pending resolution of the warning letter issued by the FDA are areas of concern.
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