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BioScrip: Guidance Disappoints, Home Solutions Raises Hope

BAX NXTM BIOS BVX

Trades from $3

On Nov 14, 2016, we issued an updated research report on BioScrip, Inc. (BIOS - Free Report) – a provider of home infusion and pharmacy benefit management (PBM) services.

BioScrip posted a year-over-year drop in revenues in third-quarter 2016, partly due to lower-than-expected core sales volumes. Based on unimpressive third-quarter results, considering the ongoing integration work associated with the Home Solutions acquisition and the company’s latest upper management churn, BioScrip decided to lower its earlier provided full-year 2016 guidance. This lowered view remains another cause of concern, showing little chance of recovery any time soon.

On a positive note, we are looking forward to BioScrip’s recently acquired Home Solutions − the home infusion and nursing products business of HS Infusion Holdings. The combined company is expected to generate revenues of more than $1 billion. The acquisition, apart from accelerating the company’s growth in core business, will likely generate $14−$17 million in cost savings within approximately 12−18 months following completion.

We are also encouraged by BioSrip’s progress with its multi-faceted strategic plan, which was adopted to improve the company’s financial position and place it as a pure play infusion services company focused on high-growth services.

With the new initiatives likely to enhance its overall business, we expect BioScrip to overcome its loss scenario as well, on the back of these steps. Meanwhile, management has authorized a process to concurrently explore a range of strategic alternatives, including transitioning chronic therapies to alliance partners or a potential sale or merger of the company.

On the flip side, reimbursement issues continue to strain BioScrip’s performance. Over the last several years, increased Medicaid spending, combined with slow state revenue growth, led many states to institute measures aimed at control in spending, which subsequently hurt operating performances of companies like BioScrip. Additionally, the competitive landscape remains an overhang.

Zacks Rank & Key Picks

BioScrip currently carries a Zacks Rank #4 (Sell). Better-ranked medical stocks are Nxstage Medical Inc. (NXTM - Free Report) , Baxter International Inc. (BAX - Free Report) and Bovie Medical Corporation (BVX - Free Report) .

Nxstage Medical and Baxter sport a Zacks Rank #1 (Strong Buy) while Bovie Medical carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Nxstage Medical surged 31.6% over the last one year compared to the S&P 500’s 6.3% over the same period. The company has a four-quarter average positive earnings surprise of 50.00%.

Baxter International rallied 20.9% in the past one year, much higher than the S&P 500’s 4.5%. It has a trailing four-quarter average positive earnings surprise of 27%.

Bovie Medical recorded a 126.5% gain in the past one year, way better than the S&P 500’s 4.5%. The company has a trailing four-quarter average positive earnings surprise of 28.7%.

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