BioScrip Reaffirmed at Neutral - Analyst Blog
February 20 2013 - 9:50AM
Zacks
We maintain our long-term Neutral recommendation on BioScrip Inc.
(BIOS). Although the company has several positive catalysts to
drive growth over the long haul, looming concerns keep us on the
sidelines for this pharmacy benefit manager and infusion service
provider.
Why the Reiteration?
BioScrip’s results in the most recent quarter surpassed the Zacks
Consensus Estimate. While revenues shot up 27.3% year over year,
adjusted earnings per share was in line with the year-ago
results.
Following the divestment of pharmacy services business to Walgreens
(WAG), BioScrip increased its focus on its Infusion franchise. This
is reflected in the recent acquisition of HomeChoice which will
significantly boost revenue in the future. The buyout is expected
to be accretive to BioScrip’s annual top-line by $70 million.
However, we are apprehensive about integration risks.
While the company enjoys strong presence and competitive advantage
in the Infusion and Home Health industry, the competitive landscape
with larger players and deeper pockets remains unyielding. The
competitive pressure also led to aggressive price wars in the last
quarter. Consequently, margins remained under pressure.
The decline in Home Health reimbursement rates from certain
government players also negatively impacted the company by creating
a challenging operating environment. We note that BioScrip derived
33% of its revenues directly from Medicare, Medicaid or other
government-sponsored healthcare programs in the third quarter.
Reimbursement cuts are therefore a looming concern.
Based on these factors, estimates for 2013 for BioScrip have
remained stagnant over the last 30 days. Accordingly, the stock
carries a Zacks Rank #3 (Hold).
Other Stocks to Consider
We continue to monitor the future developments at BioScrip which
might affect its financial results. Meanwhile, other medical stocks
such as Given Imaging (GIVN), ResMed (RMD) and Medical Action
(MDCI), carrying a Zacks Rank #1 (Strong Buy) are expected to do
well in the near term.
We maintain our long-term Neutral
recommendation on BioScrip Inc. (BIOS). Although
the company has several positive catalysts to drive growth over the
long haul, looming concerns keep us on the sidelines for this
pharmacy benefit manager and infusion service provider.
Why the
Reiteration?
BioScrip’s results in the most
recent quarter surpassed the Zacks Consensus Estimate. While
revenues shot up 27.3% year over year, adjusted earnings per share
was in line with the year-ago results.
Following the divestment of
pharmacy services business to Walgreens (WAG),
BioScrip increased its focus on its Infusion franchise. This is
reflected in the recent acquisition of HomeChoice which will
significantly boost revenue in the future. The buyout is expected
to be accretive to BioScrip’s annual top-line by $70 million.
However, we are apprehensive about integration risks.
While the company enjoys strong
presence and competitive advantage in the Infusion and Home Health
industry, the competitive landscape with larger players and deeper
pockets remains unyielding. The competitive pressure also led to
aggressive price wars in the last quarter. Consequently, margins
remained under pressure.
The decline in Home Health
reimbursement rates from certain government players also negatively
impacted the company by creating a challenging operating
environment. We note that BioScrip derived 33% of its revenues
directly from Medicare, Medicaid or other government-sponsored
healthcare programs in the third quarter. Reimbursement cuts are
therefore a looming concern.
Based on these factors, estimates
for 2013 for BioScrip have remained stagnant over the last 30 days.
Accordingly, the stock carries a Zacks Rank #3 (Hold).
Other Stocks to
Consider
We continue to monitor the future
developments at BioScrip which might affect its financial results.
Meanwhile, other medical stocks such as Given
Imaging (GIVN) and ResMed (RMD), carrying
a Zacks Rank #1 (Strong Buy) are expected to do well in the near
term.
BIOSCRIP INC (BIOS): Free Stock Analysis Report
GIVEN IMAGING (GIVN): Free Stock Analysis Report
RESMED INC (RMD): Free Stock Analysis Report
WALGREEN CO (WAG): Free Stock Analysis Report
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