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On Apr 9, we upgraded our long-term recommendation on BioScrip (BIOS - Analyst Report) to Outperform from Neutral. The upgradation is based on the avid outlook for 2013, strong potential of its operating platforms and favorable market trends. We are optimistic that this provider of infusion, home healthcare and pharmacy benefit management (PBM) services can keep the momentum going over the long haul.

Why the Upgrade?

As reported earlier, BioScrip’s revenue guidance for 2013 of $830–$865 million, reflects growth in the range of 25% to 30% and outpaced the then Zacks Consensus Estimate of $770 million. The robust expectations are based on the solid ongoing growth momentum. The company is confident about witnessing stronger business momentum going forward on the back of strategic acquisitions.

On a segment basis, BioScrip has been recording persistent growth in the Infusion Services segment over the past few quarters. Further, the company surpassed its forecast of annual revenues of $100–$105 million from the PBM franchise. BioScrip is taking several strategic initiatives to bolster its business through further market expansion.

BioScrip has significant opportunities for growth in three operating areas with several catalysts to accelerate growth in the future. Factors such as demographic tailwinds, increasing healthcare coverage in the U.S. and a fast growing PBM industry are material upsides for the company.

With respect to earnings trend, BioScrip delivered positive earnings surprise in 2 of 4 quarters in 2012 with an average beat of 100%. The Zacks Consensus Estimate for the first quarter 2013 is currently pegged at 3 cents.

This drug store retailer carries a Zacks Rank #3 (Hold). Our proven model does not conclusively show that BioScrip is likely to beat earnings this quarter. This is because though the stock carries Zacks Rank #3 (which increases the probability of positive earnings surprise), Earnings ESP (Read: Zacks Earnings ESP: A Better Method) is zero for the quarter.  

Other Stocks to Consider

While we believe that the stock is an attractive long-term investment, other healthcare stocks such as Safeway (SWY - Analyst Report), Cyberonics (CYBX - Analyst Report) and Cepheid (CPHD - Analyst Report), carrying a Zacks Rank #1 (Strong Buy), are also worth considering.

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