BioScrip Posts Mixed 4Q

Specialty pharmacy services provider, BioScrip Inc. ( BIOS - Analyst Report ) reported EPS of 12 cents in the fourth quarter of fiscal 2011, much better than the year-ago quarter loss of $1.25 per share. Reported results also surpassed the Zacks Consensus Estimate of 9 cents. However, the company in the year-ago quarter recorded a non-cash charge for deferred tax asset reserve of $54 million.

Fiscal 2011 EPS stood at 14 cents versus a loss of $1.37 per share in fiscal 2010. The adjusted EPS for the year came in at 33 cents missing the Zacks Consensus Estimate of 36 cents.

BioScrip primarily operates through two segments – Infusion and Home Health Services and Pharmacy Services. Total revenue in the reported quarter stood at $483.3 million, up 7.3% year over year and above the Zacks Consensus Estimate of $460 million. For the full year, total revenue came in at $1.8 billion, in line with the Zacks Consensus Estimate and up 12.5% year over year.

The solid revenue growth in the reported quarter was attributable to a 7.1% rise in Pharmacy Services revenue to $361.7 million and an 8% increase in Infusion/Home Health Services revenue to $121.6 million.

Gross profit during the quarter increased 12.6% to $81.8 million leading to an 80 basis points (bps) expansion in gross margin to 16.9%. Adjusted operating margin for the quarter was 4.4% compared with 2.8% in the year-ago quarter.

BioScrip’s operating cash flow of $27.0 million in fiscal 2011 compared favorably with $21.4 million in 2010.This was due to a decrease in working capital requirements of $23.1 million and an increase of $25.3 million in net income adjusted for non-cash items.

The company faces significant competition in the pharmaceutical healthcare services industry from the likes of CVS Caremark ( CVS - Analyst Report ) and Express Script ( ESRX - Analyst Report ) as well as many smaller organizations that operate on a local or regional basis.

BioScrip is gradually witnessing continued expansion in the top line. The company has started to expand its footprint in the domestic market based on the CHS acquisition. Moreover, the company has been taking several steps to emphasize more on areas with long-term growth potentials and high returns.

Also its recent decision to divest a part of its pharmacy business to Walgreen ( WAG - Analyst Report ) is expected to enable the company to invest more in Infusionand Home Health segment where it holds a competitive advantage.

BioScrip presently retains a short-term Zacks #3 Rank (Hold). Over the long term, we have a Neutral recommendation on the stock.