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Option Care (BIOS) Down 12% Since Last Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for Option Care (BIOS - Free Report) . Shares have lost about 12% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Option Care due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Option Care Health Posts Loss in Q3, Operating Margin Deteriorates

Option Care Health incurred an adjusted loss of a penny per share in third-quarter 2019, in line with the Zacks Consensus Estimate. Meanwhile, the figure is narrower than the year-ago loss of 9 cents.

GAAP net loss was 7 cents per share, reflecting a significant drop from the break-even level a year ago.

Revenues

Net revenues of $615.9 million in the third quarter rose 24.7% year over year, up 2.3% on a comparable basis.The figure also exceeded the Zacks Consensus Estimate by 18%.

Margins

In the third quarter, gross profit improved 27.3% to $137.8 million. Also, gross margin expanded 45 basis points (bps) to 22.4%.Although the company is yet to start realizing the merger-related synergies to a material extent, the reporting of positive gross margin is an indication of its successful execution of operational efficiencies.

On account of a 55.3% surge in general and administrative costs, adjusted operating margin contracted 382 bps to 0.7%.

Financials

Option Care Health exited the third quarter with cash and cash equivalents of $52.7 million compared with $36.4 million at the end of 2018. Year to date, net cash provided by operating activities was $16.6 million compared the year-ago figure of $12.2 million.

Guidance

The combined entity is yet to provide any guidance for the balance of 2019 or for 2020. It expects to issue guidance for 2020 when it reports fourth-quarter 2019 results.

How Have Estimates Been Moving Since Then?

Estimates revision followed a downward path over the past two months. The consensus estimate has shifted -100% due to these changes.

VGM Scores

Currently, Option Care has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Option Care has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.


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