Omnicare, Inc.

Omnicare Inc. (OCR - Snapshot Report) raised full-year guidance after a strong third-quarter as pharmacy services for the elderly continue to see growth even in a rocky economic environment. OCR has surprised on estimates 4 consecutive quarters by an average of 14.73%. Omnicare has a forward P/E of 11.89.

Company Description

Omnicare provides pharmaceutical care for 1.4 million seniors in skilled nursing, assisted living and other healthcare facilities in 47 states and Canada.

The company, a Zacks #1 Rank (strong buy), operates several segments beyond basic pharmacy services to the elderly. These include Geriatric Pharmaceutical Care Guidelines which uses formulas to determine the most appropriate medicine for the elderly and Clinical Programs that aim to detect and treat illnesses among seniors.

The company also operates a Senior Health Outcomes segment which manages pharmaceutical care for major corporations' retirees and employees and an Information Solutions segment which provides clinical and financial software to long-term care facilities.

Omnicare Beats Wall Street Estimates by 14.73% in the Third Quarter

On Oct 30, Omnicare reported third-quarter earnings that surprised on estimates by 12 cents per share. Adjusted net income rose 33% to $71.2 million, or 61 cents, from $53.4 million, or 44 cents. Analysts expected 49 cents per share.

Sales rose 4% to $1.6 billion from $1.5 billion in the year ago period. Omnicare's largest segment is pharmacy services which saw sales climb 5% to $1.55 billion from $1.48 billion in the third-quarter 2007. The increase in sales was due to strong drug price inflation, the utilization of certain high acuity drugs and biologic agents and growth in its specialty pharmacy services business, which included the acquisition of Advanced Care Scripts.

Omnicare said that these factors more than offset the impact of the increased use of generic drugs, the lower net number of beds served, as well as lower revenues reported from copays and rejected claims.

Omnicare Raises 2008 Full Year Guidance

Given the strong third-quarter results and the belief that its services are essential, no matter the economic conditions, Omnicare raised its full-year EPS guidance to the range of $2.09 to $2.11, up from its forecast on July 31 of $1.85 to $1.95 per share.

Consensus Estimates Rise

Given the company's sharp upward increase in guidance for the full year, covering analysts scrambled to raise fourth-quarter and full-year estimates. 7 out of 11 analysts raised fourth-quarter consensus estimates in the last week by an average of 7 cents to 60 cents per share.

For the full year, consensus estimates spiked to $2.07 from $1.87, slightly below the company's guidance.

Value Fundamentals

Omnicare is trading with a forward P/E of 11.89. Its price-to-book is 0.94. It has a 5-year average return on equity (ROE) of 10.89%. As an added bonus, the company pays a dividend with a current yield of 0.30%.

Read the full analyst report on OCR