Why BioScrip Inc. Shares Stumbled

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of BioScrip (NASDAQ: BIOS  ) , a provider of home care services and pharmacy benefit management services in the U.S., tumbled by as much as 13% after the company reported disappointing fourth-quarter earnings results.

So what: For the quarter, BioScrip reported a nearly 35% increase in revenue to $243.5 million, driven by a 56.3% boost in its infusion services segment. The bulk of this gain came from the acquisition of HomeChoice and CarePoint, and through organic growth from its existing infusion services. By contrast, its home health service revenue was basically flat while its pharmacy benefit management, or PBM, segment saw revenue nearly halved to $13.5 million due to the termination of a low-margin client during the quarter. Despite its strong revenue growth, BioScrip's loss per share ballooned to $0.23 from $0.03 in the year-ago period. By comparison, BioScrip topped the Street's revenue estimate by nearly $4.1 million, but missed its expectation of a $0.04 EPS profit by a mile. For fiscal 2014, BioScrip anticipates 20% revenue growth in its infusion segment with double-digit organic growth that will be offset by ongoing weakness in its home health and PBM segments.

Now what: BioScrip has obviously demonstrated that it can grow rapidly via acquisitions, but today's drop appears to demonstrate that shareholders want to see better cost control and more organic growth before they'll give it a clean bill of health. With the uncertainties of Medicare reimbursements readily apparent because of the transformative health care law known as Obamacare, I can understand why the home health segment is struggling. However, there's no reason that BioScrip shouldn't be able to snag new contracts in its PBM segment, which should benefit from Obamacare. Until we see a marked improvement in BioScrip's bottom line and its PBM segment, I'd suggest sticking to the sidelines.

BioScrip's rapid revenue growth obviously gives the stock a lot of potential, but even it appears unlikely to be able to keep up with this top stock in 2014
There's a huge difference between a good stock and a stock that can make you rich. The Motley Fool's chief investment officer has selected his No. 1 stock for 2014, and it's one of those stocks that could make you rich. You can find out which stock it is in the special free report "The Motley Fool's Top Stock for 2014." Just click here to access the report and find out the name of this under-the-radar company.


Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2857914, ~/Articles/ArticleHandler.aspx, 10/23/2014 1:15:56 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement