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Hospira Inc.’s (HSP - Analyst Report) first quarter 2013 adjusted earnings of 52 cents per share beat the Zacks Consensus Estimate of 44 cents. Higher-than-expected revenues led to the earnings beat. Moreover, earnings were above the year-ago figure by 10.6%. Including one-time items, the company suffered a loss of 46 cents per share as opposed to earnings of 24 cents a year-ago.

First quarter revenues increased 2.3% to $988.3 million, narrowly beating the Zacks Consensus Estimate of $988 million.

Quarter in Detail

The Specialty Injectable Pharmaceuticals (SIP) business, the biggest contributor to Hospira’s revenues, performed well in the quarter with sales from the segment climbing 11.1% (up 11.4% at constant currency) to $651.5 million.

Drugs such as Precedex performed well during the quarter. Segmental results were also aided by the improved pricing of SIP drugs. The SIP segment includes generic injectables as well as proprietary specialty injectables.

The segment includes offerings such as the generic version of Sanofi’s (SNY - Analyst Report) cancer drug, Eloxatin. Under the segment, Hospira also markets biosimilars such as Nivestim, a biosimilar of Amgen’s (AMGN - Analyst Report) Neupogen, in Europe and Australia.

The Medication Management segment performed disappointingly during the first quarter of 2013. Sales in the segment declined 10.7% (down 10.6% at constant currency) to $228.8 million. The segment has been going through a rough patch. In Feb 2013, the US Food and Drug Administration (FDA) expanded the import ban on certain Hospira products issued last year.

In Nov 2012, the FDA had issued a directive prohibiting Hospira from importing Symbiq medication infusion pumps, manufactured at its Costa Rica facility, into the US. The US regulatory body issued a fresh directive in Feb 2013, preventing Hospira from importing Plum, GemStar and LifeCare PCA infusion pumps, manufactured in Costa Rica, into the US. Sales in the Other Pharma division declined 12.4% (down 12.2% at constant currency) to $108.0 million.

Geographically, the Americas, Europe, Middle East and Africa and the Asia-Pacific markets contributed $786.8 million (up 2.4% at constant currency), $130.3 million (up 1.2% at constant currency) and $71.2 million (up 6.5% at constant currency), respectively, to total revenue in the first quarter of 2013.

2013 Outlook

Apart from releasing its financial results, the company issued a fresh guidance for 2013. We remind investors that Hospira withdrew its guidance for 2013 (issued while releasing the fourth quarter 2012 results) following the FDA decision in Feb 2013 to expand the import ban on some of Hospira’s products.

Hospira now expects top-line growth in the range of negative 1% to positive 1%. The company expects 2013 adjusted earnings in the range of $2.05 to $2.10 per share, representing flat to 5% growth. The Zacks Consensus Estimate currently stands at $2.04 per share, just below the company’s guidance range.

The company expects cash flow from operations for 2013 in the range of $200 million - $250 million. Depreciation and amortization is projected in the range of $255 million- $275 million. Hospira forecasts 2013 capital expenditures in the range of $425 million - $475 million.

Global Device Scheme Unfurled

In a separate development, Hospira unveiled a strategy to modernize and streamline its device portfolio in order to drive growth and serve customers in a better manner. Under the program the company intends to remove its relatively old pump technology from the market and bring in customer replacement programs over the next few years.

Moreover, Hospira intends to focus on developing next-generation pump technology. The company will focus on strengthening its global device quality system to facilitate growth.

Hospira carries a Zacks Rank #4 (Sell). Not all stocks in the medical sector are performing as poorly as Hospira. NuVasive, Inc. (NUVA - Snapshot Report) is an example of an attractive stock in the sector and carries a Zacks Rank #2 (Buy).

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