Hospira Surges Ahead - Analyst Blog

Hospira (HSP) reported strong fourth quarter and full year 2009 results. Earnings per share (EPS) came in at 87 cents, well above the Zacks Consensus Estimate of 70 cents and the year-ago earnings of 78 cents.

Revenues recorded a year-over-year increase of 15.5% to $1.1 billion, primarily driven by growth in Specialty Injectable Pharmaceuticals (SIP). However, after taking into account certain charges related to its operations and restructuring initiatives, EPS declined 10.8% to 58 cents. For the full year, the company reported revenues and EPS of $3.9 billion (up 6.9%) and $3.11(up 22.9%), respectively.

While SIP revenues increased 20.3% from the year-ago period (at constant exchange rates, CER) to $578.3 million, revenues from the Other Pharma segment increased 4.8% to $197.2 million. The strong growth in the SIP segment was driven by the launch of the generic oncolytic oxaliplatin during the third quarter as well as robust growth in the sedative agent Precedex.

In addition, revenues from Medication Management Systems (MMS) increased 5.3% year-over-year at CER to $176.3 million. However, like the third quarter, Other Devices continued to fall in the reported quarter and recorded revenues of $103.4 million, down 9.3% at CER.

Geographically, during the fourth quarter, Americas, Europe, Middle East & Africa (EMEA) and Asia Pacific contributed $823.5 million (up 12.7%), $153.6 million (up 8%) and $78.1 million (down 1.7%), respectively (compared to the corresponding period last year) at CER, to total revenues. Operating income increased 8.5% to $204 million, largely driven by the increased sales volume, favorable product mix and efficiency arising from restructuring initiatives named Project Fuel.

In addition to posting strong results, Hospira provided guidance for 2010. The company expects full year revenues to increase 6–8% at CER. Additionally, EPS is expected in the range of $3.25–$3.35, in line with the Zacks Consensus Estimate of $3.30.

As per the company’s guidance provided earlier, Hospira is confident that its cost-cutting and restructuring initiative, Project Fuel, will result in savings of $110 -$140 million by 2011. The company’s restructuring plan consists of a 10% reduction in workforce and the realignment of its product portfolio including the sale of non-core businesses.

We expect Project Fuel to provide Hospira with a competitive edge and augment long-term growth and profitability. We are Neutral on the stock.

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