BioScrip (BIOS) Q3 Loss Wider Than Expected, Revenues Miss

BioScrip, Inc. (NASDAQ:BIOS) reported net loss from continuing operations of 12 cents per share in the third quarter of 2017, flat year-over-year. However, the reported net loss per share was wider than the Zacks Consensus Estimate of a loss of 10 cents.

Revenues

With the completion of the non-core PBM business divestment, BioScrip currently has a simplified business structure focused on core Infusion Services.

Revenues from continuing operations in the third quarter declined 11.5% year over year to $198.7 million and missed the Zacks Consensus Estimate of $203 million. The year-over-year decline was led by a shift in the company’s strategy to focus on growing its core revenue mix.

Apart from that, the impact of the Cures Act, contract modifications with UnitedHealthcare and the impact of hurricanes Harvey and Irma were major deterrents. This was partially offset by synergies from the Home Solutions acquisition.

BioScrip, Inc. Price, Consensus and EPS Surprise

BioScrip, Inc. Price, Consensus and EPS Surprise | BioScrip, Inc. Quote

Gross profit in the third quarter was $67.2 million, up 7.3% year over year. Gross margin also expanded 590 basis points (bps) to 33.8%. Adjusted operating income was $57.4 million, marking an 8.9% year-over-year increase on a 1% rise in adjusted operating expenses to $9.8 million. Adjusted operating margin expanded 540 bps year over year to 28.9%.

Financials

BioScrip exited third-quarter 2017 with cash and cash equivalents of $33 million, compared with $40.5 million at the end of the second quarter.

Updated 2017 Guidance

BioScrip lowered its guidance for adjusted EBITDA to the range of $42.0-$44.0 million from the earlier $45.0-$55.0 million for full-year 2017. This guidance incorporates the estimated adverse effect of the Cures Act legislation and the company's estimates regarding its contract with UnitedHealthcare. The company has reduced its revenue outlook for 2017 to a range of $805-$810 million from the previous $815-$835 million, including the impact of the revised UnitedHealthcare contract on its 2017 revenues and the damages incurred due to hurricanes. The Zacks Consensus Estimate for revenues of $825.8 million lies above the company’s guided range.

Our Take

BioScrip exited the third quarter on a dismal note with lower-than-expected top-and-the-bottom-line performances. Management’s slashed guidance for 2017 adds to our concerns.

Nonetheless, we are encouraged by the company’s progress in the third quarter, courtesy of its new multi-faceted CORE plan to improve the financial position. The company expects core revenues at Home Solutions and continued core growth to prove accretive. We are also upbeat about the company’s completion of the UnitedHealthcare contract transition and expectations of core revenue growth.

Zacks Rank & Key Picks

BioScrip has a Zacks Rank #3 (Hold).

A few better-ranked stocks in the broader medical sector are PetMed Express, Inc. (NASDAQ:PETS) , Luminex Corporation (NASDAQ:LMNX) and Intuitive Surgical, Inc. (NASDAQ:ISRG) . Notably, PetMed and Luminex sport a Zacks Rank #1 (Strong Buy), while Intuitive Surgical carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

PetMed reported earnings per share of 43 cents in the second quarter of fiscal 2018, up 79.2% from the year-ago quarter’s 24 cents. Also, gross margin expanded 548 bps year over year to 35.2% in the reported quarter.

Luminex reported adjusted earnings per share of 19 cents in the third quarter of 2017, up 216.7% year over year. The company’s revenues in the quarter increased almost 4.1% year over year to $74.1 million.

Intuitive Surgical posted adjusted earnings of $2.77 per share in the third quarter of 2017, up 34.5% on a year-over-year basis. Revenues increased 18% year over year to $806.1 million.

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