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Hospira Tops on All Fronts

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Hospira Inc.’s third quarter 2012 earnings (excluding special items) of 47 cents per share beat the Zacks Consensus Estimate of 45 cents. Higher than expected revenues led to the earnings beat. However, earnings fell short of the year-ago figure by 28.8%.

On a reported basis (including special items), the company earned 1 cent per share as opposed to the year-ago loss of 54 cents per share.

The Lake Forest, Illinois-based company came up with revenues of $994 million in the reported quarter, beating the Zacks Consensus Estimate of $990 million. Revenues were 1.8% higher than the year-ago figure driven by strong sales of key drugs in the Specialty Injectable Pharmaceuticals (SIP) business at Hospira.

Quarter in Details

The SIP business, the biggest contributor to Hospira’s revenues, performed well in the quarter with sales from the segment climbing 2.6% (up 4.9% at constant currency) to $643.2 million.

Drugs such as Precedex performed well during the quarter. Moreover, the August 2012 re-launch of Hospira’s generic version of Sanofi’s (SNY - Free Report) cancer drug, Eloxatin, also aided results. The SIP segment includes generic injectables as well as proprietary specialty injectables.

Sales in the Medication Management segment declined 1.7% (up 0.5% at constant currency) to $236.6 million. Sales in the Other Pharma division climbed 4.5% (up 5.6% at constant currency) to $114.2 million.

Geographically, the Americas, Europe, Middle East and Africa and the Asia-Pacific markets contributed $789.1 million (up 3.6% at constant currency), $122.9 million (up 5.2% at constant currency) and $82.0 million (up 4.9% at constant currency), respectively, to total revenue in the reported quarter.

2012 Outlook

The company continues to expect top-line growth in the range of -1% to 2% on a constant currency basis. Foreign exchange is expected to negatively impact the top line by 1 to 2%. The company expects 2012 adjusted earnings of $2.00 per share. The Zacks Consensus Estimate for 2012 too stands at $2.00 per share.

Hospira now expects cash flow from operations in the range of $475-$500 million (previous guidance: $475-$525 million) in 2012.  The company now expects capital expenditures in the range of $325-$350 million (previous guidance: $350-$400 million). Depreciation and amortization continues to be projected in the range of $240-$260 million.

Neutral on Hospira

Currently, we have a long-term Neutral recommendation on Hospira. The stock carries a Zacks #3 Rank (Hold rating) in the short run.

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