Omnicare Inc. ( OCR - Snapshot Report ) , a provider of drugs to long-term care facilities and nursing homes, reported second quarter 2012 adjusted (excluding one-time expenses) earnings per share of 83 cents, beating the Zacks Consensus Estimate of 79 cents.

Reported net income in the quarter came in at $18.7 million (or 17 cents per share) compared with a net loss of $1.4 million (or 1 cent per share) in the year-ago quarter.

Revenues

Sales declined 1.3% year over year to $1,536.0 million in the second quarter, missing the Zacks Consensus Estimate of $1,564 million.

Segment Analysis

Net sales of the Long Term Care Group were $1,202.8 million in the second quarter, down 6.7% year over year.

Net sales of the Specialty Care Group were $330.1 million, up 25.7% year over year.

Margins

Gross profit was $367.3 million in the second quarter, up 9.2% year over year. Adjusted EBITDA from continuing operations stood at $170.3 million, up 16.4% year over year.

Balance Sheet, Cash Flow and Other

Omnicare ended the second quarter with cash and cash equivalents of $564.5 million, up 7.7% year over year. Long-term debt (including notes and convertible debentures) was sizeable at $2.0 billion, up 3.5% year over year.

Cash flow from continuing operations in the quarter was $120.2, down 12.2% year over year.

Omnicare repurchased about 1.8 million shares in the second quarter for $58 million. The company had $179 million available under its recent share repurchase authorization, as of June 30, 2012.

Outlook

For 2012, Omnicare continues to anticipate revenues between $6.1 billion and $6.2 billion. However, the company has upward revised its expected adjusted earnings per share (from continuing operations) in a range of $3.22 to $3.28 compared with $3.10 to $3.20 earlier. Omnicare also increased its forecast for cash flows (from continuing operations) to the range of $425 million to $525 million compared to the earlier range of $400 million to $500 million.

Omnicare is a market leader in providing pharmaceutical care for the elderly. The industry is essential for the needs of the long-term care population. It competes with PharMerica Corporation ( PMC - Snapshot Report ) and National Healthcare Corp. ( NHC ) in certain niche segments.

The company has cut down costs and increased efficiency through its Full Potential Plan. However, the beneficial effects are partly offset by pressure from reimbursement cuts.

Over the long term, Omnicare will be able to offset some of these reimbursement cuts through better purchase. Generics coming to market in the next few quarters present a major opportunity for profit due to Omnicare’s greater exposure to the institutional pharmacy channel than in past years.

The stock currently retains a Zacks #2 Rank, which translates into a short-term Buy rating.