Hospira Inc. Earnings Cheat Sheet: Margins Shrink as Costs Rise

S&P 500 (NYSE:SPY) component Hospira Inc. (NYSE:HSP) reported a drop to a loss in the third quarter driven by higher costs. Hospira is a global specialty pharmaceutical and medication delivery company that develops products that help improve the safety and productivity of patient care.

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Hospira Earnings Cheat Sheet for the Third Quarter

Results: Reported a loss of $88.9 million (54 cents per diluted share) in the quarter. The drug delivery company had net income of $71.4 million or 42 cents per share in the year earlier quarter.

Revenue: Rose 2.9% to $976.7 million from the year earlier quarter.

Actual vs. Wall St. Expectations: HSP reported adjusted net income of 66 cents per share. By that measure, the company fell in line with the mean estimate of 66 cents per share. It fell short of the average revenue estimate of $1.04 billion.

Quoting Management: “As we indicated in our Oct. Eighteen press release, despite the continued contribution of recently launched products to revenue growth, our third-quarter results were significantly impacted by developments related to our quality-improvement initiatives,” said F. Michael Ball, chief executive officer. “Addressing these issues is Hospira’s top priority, and our organization is committed to full resolution. I remain confident that Hospira will emerge from this process a stronger, more competitive global company that is optimally positioned to serve the needs of our customers and patients, and deliver strong value to our shareholders.”

Key Stats:

Gross margin shrank 7.5 percentage points to 31.1%. The contraction appeared to be driven by increased costs, which rose 15.5% from the year earlier quarter while revenue rose 2.9%.

The company fell in line with estimates last quarter after topping expectations in the previous two quarters. In the second quarter, it topped the mark by 16 cents, and in the first quarter, it was ahead by 14 cents.

The company’s loss in the latest quarter follows profits in the previous three quarters. The company reported a profit of $143.6 million in the second quarter, a profit of $149.9 million in the first quarter and $60.6 million in the fourth of the last fiscal year.

The company’s revenue has now risen for two straight quarters. In the second quarter, revenue increased 9.9% to $1.06 billion from the year earlier quarter.

Looking Forward: Over the past ninety days, the average estimate for the fourth quarter has fallen from $1.22 per share to 53 cents, indicating that analysts are growing pessisimistic about the company’s performance next quarter. At $3.01 per share, the average estimate for the fiscal year has fallen from $3.97 ninety days ago.

Competitors to Watch: Teva Pharmaceutical Industries Ltd (NASDAQ:TEVA), Mylan Inc. (NASDAQ:MYL), Akorn, Inc. (NASDAQ:AKRX), Novartis AG (NYSE:NVS), Baxter International Inc. (NYSE:BAX), Watson Pharmaceuticals, Inc. (NYSE:WPI), Pfizer Inc. (NYSE:PFE), DURECT Corporation (NASDAQ:DRRX), ICU Medical, Incorporated (NASDAQ:ICUI), and Allergan, Inc. (NYSE:AGN).

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(Source: Xignite Financials)

 

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