IMS Ahead of Zacks Estimate

This morning, IMS Health (RX) reported third-quarter earnings per share of 40 cents, beating the Zacks Consensus Estimate by 4 cents. However, earnings declined 7% from the year-ago period. Revenues came in at $540.8 million. With clients reining in their spending due to the economic downturn, revenues declined 6%. Curtailed spending should continue affecting revenues.
 
Operating income for the quarter was $100.8 million, down 21% from the year-ago period. The company did not undertake any share repurchasing activities during the quarter even though 9.5 million shares remain authorized and available for repurchase. Preliminary free cash flow was $155.2 million. The company exited the quarter with $301.7 million in cash and cash equivalents. Total debt declined to $1,344.9 million, compared to $1,404.2 million at the end of 2008.
 
The company reported that it is continuing to work on lowering its cost structure and increase operational efficiencies. Earlier this year, IMS implemented a restructuring plan under which it intends to streamline its operations, improve productivity of different operating segments, reduce capacity and align the size of its sales and management consulting teams in low demand areas, and focus on high-value, strategic growth areas.
 
Following the release of third quarter results, the company did not provide updated financial guidance. According to guidance provided in the second quarter, IMS expects full-year revenues to decline. Moreover, the company stated that it expects earnings to come in approximately 10 cents below the original EPS guidance of $1.70 - $1.77.
 
Earlier this week, IMS announced that it is exploring several strategic alternatives. While details were not provided, we believe the company might be seeking a buyer.
 
IMS is the world’s leading provider of market intelligence to the pharmaceutical and healthcare industries. Operating in over 100 countries, IMS offers leading-edge market intelligence products and services that are integral to clients’ day-to-day operations, including product and portfolio management capabilities; commercial effectiveness innovations; managed care and consumer health offerings; and consulting and services solutions that improve productivity and the delivery of quality healthcare worldwide.

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