UPDATE: Hospira 1Q Net More Than Doubles On Tax-Related Gain
29 April 2009 - 3:47AM
Dow Jones News
Hospira Inc.'s (HSP) first-quarter net income more than doubled
behind a big tax-related gain while sales came in higher than
expected with help from sales of fluid pumps and a business that
makes drugs for other companies.
While tough economic conditions have created a drag on part of
Hospira's business, and the company has also pushed back its
timeline for launching a key generic antibiotic, it still boosted
the low end of its full-year earnings guidance. A lower expected
tax rate and benefits from an ongoing cost-cutting plan are
expected to help offset the negative pressures.
The Lake Forest, Ill., company also reiterated on Tuesday its
2009 sales target.
First-quarter sales showed "resilience in a still-weak economy,"
Leerink Swann analyst Rick Wise said in a note to investors.
Investors responded favorably, lifting Hospira shares by 5.5% to
$33.07 in recent trading. Shares reached $33.88 earlier, marking
the highest point in about six months.
The company reported first-quarter net income of $165.5 million,
or $1.03 a share, up from $65.4 million, or 41 cents a share, a
year earlier. Excluding items, including a latest-quarter 57-cent
gain from the settlement of a tax audit, earnings rose to 60 cents
a share from 55 cents.
Analysts surveyed by Thomson Reuters had anticipated, on
average, earnings of 55 cents a share in the recent quarter.
Net sales fell 3.3% to $859.7 million, reflecting the effects of
unfavorable exchange rates and pricing pressure in specialty
injectable drugs in the Europe, Middle East and Africa region,
Hospira said. Still, sales edged above the Wall Street forecast and
also topped the company's expectations.
Gross margin rose to 37.2% from 35.7%.
Hospira said sales in the Americas rose 1.6%, but the Europe,
Middle East and Africa segment saw a 21% slide and the Asia-Pacific
region had a 13% drop, with currency playing a big role.
Among Hospira's businesses, global specialty injectable drug
sales slipped about 7.5% in the quarter, or 1.6% excluding
currency, amid tough comparisons with the year-earlier period, said
Terrence C. Kearney, the company's chief operating officer, on a
call with analysts. He noted that sales for this business were flat
in the Americas region excluding currency due in part to a mild
winter flu season.
In the company's medication-management business, which includes
fluid-delivery pumps, sales inched higher and grew by 6% when
currency is excluded. Constraints in hospital budgets have affected
sales a bit here, but Hospira ended 2008 with a strong backlog of
signed contracts and is also picking up business from competitive
accounts, Kearney noted.
Hospira competes in the pump market with Baxter International
Inc. (BAX) and Cardinal Health Inc. (CAH). Both of those companies
have experienced some product issues, particularly at Baxter, where
its widely used pumps have been off the market for years due to a
series of tough-to-resolve problems.
Sales in Hospira's contract-manufacturing business, which is
part of the company's "Other Pharma" category that saw sales rise
4% in the quarter, were helped by a one-time demand boost related
to customers replenishing inventory, Kearney said. Contract
manufacturing involves the production of injectable products for
other drug and biotechnology companies.
Looking ahead, Hospira said it is no longer including any
anticipated results from a generic version of Wyeth's (WYE)
antibiotic Zosyn in its full-year guidance. Additionally, "we don't
believe we've seen the bottom of capital constraints resulting from
the recession," said Thomas E. Werner, Hospira's chief financial
officer, during the call.
Nevertheless, with help from a lower tax rate following the
settlement and a cost-cutting plan that includes eliminating 10% of
its work force, Hospira said it now sees its earnings excluding
one-time items landing in a $2.67-to-$2.72-per-share range this
year. The low end of that range is up 5 cents.
Meantime, Hospira continues to expect sales will grow 4% to 6%
this year excluding the impact of currency rates, or to be flat
when currency is included. Hospira's full-year revenue was $3.63
billion in 2008.
Analysts had projected full-year earnings of $2.67 a share on
sales of $3.63 billion.
-By Jon Kamp, Dow Jones Newswires; 617-654-6728;
jon.kamp@dowjones.com
(Mike Barris contributed to this report.)