Hospira Surges Ahead

Hospira (HSP - Analyst Report) reported third quarter earnings of 90 cents per share, well above both the Zacks Consensus Estimate of 68 cents and 63 cents per share in the year-ago period. Revenues increased 8.9% to $1 billion, primarily driven by growth in Specialty Injectable Pharmaceuticals (SIP).

SIP revenues increased 25.6% from the year-ago period (at constant exchange rates, CER) to $575.7 million while revenues from the Other Pharma segment came down 8.4% to $157.4 million. The strong growth in the SIP segment was driven by the launch of the generic oncolytic oxaliplatin in the quarter.

Unlike the previous quarter, revenues from Medication Management Systems (MMS) increased 1.7% year over year at CER to $162.6 million. However, Other Devices continued to fall in the reported quarter and recorded revenues of $111.8 million, down 6.4% from the year ago period.

Geographically, Americas, Asia-Pacific and Europe, Middle East & Africa (EMEA) contributed $803.4 million (up 14.6%), $74.5 million (up 5.2%) and $129.6 million (down 5%), respectively (compared to the corresponding period last year) at CER. Operating income grew 21.7% to $161.5 million, largely driven by the increased sales volume and manufacturing efficiency, partially offset by certain product recall-related costs and foreign-exchange movement.

In addition to posting strong quarterly results, Hospira reaffirmed its revenue guidance, announced earlier this month. The company expects its full-year revenues to increase 5 - 7% at CER. Additionally, earnings per share is expected in the range of $2.85 - $2.90, up from the earlier guidance of $2.80 - $2.85 due to reduced estimated tax rate of 20 - 21% from the earlier guidance of 21 - 22%.

Per the company guidance provided earlier this month, Hospira is confident that its cost-cutting and restructuring initiative, Project Fuel, will improve profitability through 2011. The company’s restructuring plan consists of a 10% reduction in workforce and the realignment of its product portfolio, including the sale of non-core businesses. It has already identified about 3700 products -- 50% of its portfolio -- which can be eliminated in due course.

We expect Project Fuel to provide Hospira with a competitive edge and augment long-term growth and profitability. We have a Neutral recommendation on the stock.

Read the full analyst report on HSP