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Analyst Blog

BioScrip, Inc. (BIOS - Analyst Report) recently declared its third-quarter 2013 results. Adjusting for certain one-time expenses BioScrip reported earnings were 1 cents in the quarter, declining from the year-ago earnings figure of 2 cents. The results were in line with the Zacks Consensus Estimate of 1 cent.

Following the announcement on Nov 6, stock price of BioScrip declined 15.8% to $6.05 per share on Nov 11.

On a reported basis, BioScrip’s net loss was $34.1 million or 53 cents per share considerably exceeded the net loss of $11.5 million or 20 cents per share incurred in the year-ago quarter.

Revenues in Detail

Total revenues rose 22.6% year over year to $208.8 million, beating the Zacks Consensus Estimate of $205 million. The company operates through three main segments, viz. Infusion Services (83% of total revenues), Home Health Services (8.6%) and PBM Services (7.6%).

Segments in Detail

The company reported revenues of $174.8 million in Infusion Services, recording impressive growth of 38.8% year over year. Organic growth and acquisitions were the major revenue drivers in this segment.

Revenues in the Home Health Services segment increased 4.46% to $18.1 million. The rise came on the back of volume improvement from private duty nursing activity, partially offset by a reduction in reimbursement rates.

Revenues in the PBM Services segment were $16 million, down 41% from the prior-year quarter. The decline was due to lower sales volume of discount cards and termination of a contract with a PBM client.

Operational Update

While the cost of product revenues shot up 34.9% to $115.5 million, the cost of service revenues declined 7.9% to $24.6 million in the quarter.

Gross profit during the quarter increased 18.4% year over year to $68.6 million on account of greater volume of business generated from Infusion Services. However, gross margin contracted 110 basis points (bps) to 32.9% owing to business mix. The downfall resulted from the Infusion Services segment growing more rapidly than the higher-margin PBM Services segment.

Selling, general and administrative (SG&A) expenses increased 24% to $57.9 million. The hike in expenditure resulted in a drag of 135 bps in adjusted operating margin, which settled at 3.2% for the reported quarter.

Financial Update

The company ended the quarter as on Sep 30, 2013, with no cash balance as all its cash had been utilized. The long-term debt was $415.5 million as on Sep30, 2013 as compared to $226.4 million on Dec30, 2104.

Guidance

For 2013, BioScrip continues to expect revenues of $830–$850 million.

Our Take

Despite the core business of the company generating positive growth, it delivered a satisfactory quarter, as revenues could not surpass the estimates.

BioScrip is focusing on the implementation of a company-wide profit improvement plan to deliver robust operating performance in the future. Such an initiative will help it to generate greater savings through acquisition-related synergies, improved operating efficiencies and reductions in SG&A expenses. We are also optimistic about the recent acquisitions being accretive for the company’s business in the long run.

Currently, the stock carries a Zacks Rank #3 (Hold). Other stocks that are worth a look include Rite Aid Corporation (RAD - Analyst Report) sporting a Zacks Rank #1 (Strong Buy), and CVS Caremark Corporation (CVS - Analyst Report) and GNC Holdings Inc. (GNC - Snapshot Report), each carrying a Zacks Rank #2 (Buy).
 

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