Lincare Beats, Profit Slips

Lincare Holdings (LNCR - Snapshot Report), a leading provider of oxygen and respiratory therapies, posted third-quarter fiscal 2011 earnings per share of 48 cents, a penny above the Zacks Consensus Estimate and the year-ago earnings. Profit fell 4% year over year to $43.6 million as higher costs more than neutralized an increase in sales.

Revenues soared 13.4% year over year to $474.8 million, well ahead of the Zacks Consensus Estimate of $455 million. Sales included an unfavorable impact of $9.7 million (or 2.3%) associated with Medicare payment changes, which partly offset the internal and acquisition growth of roughly 15.7%.

Operating income fell roughly 4% year over year to $80.4 million with operating margin dipping to 16.9% from 20% a year ago. Consolidated cost and expenses rose nearly 18% year over year to $394.4 million, led by higher cost of sales which spiked 31% in the quarter.

Lincare generated $217.2 million (down 16% year over year) in cash from operation during the first nine months and spent $95.7 million and $95.6 million as net capital expenditures and for business acquisitions, respectively. Cash and investments fell 71% year over year to $56.8 million, while total long-term debt increased 25.5% year over year to $622.5 million. The company bought back roughly 8 million shares during the first nine months for $200 million.

Florida-based Lincare is a leading provider of oxygen and other respiratory therapy services to patients at home. The company offers services and equipment to more than 790,000 customers across the U.S. through 1,108 local centers.

Lincare remains committed to boosting sales through its leadership in respiratory therapy services and expansion of its product range. It is well placed to be a winner in the home oxygen space in the long run. However, the company derives a major portion of its revenue from government sources and is therefore vulnerable to reimbursement rate cuts.

Read the full analyst report on LNCR