NEW YORK (TheStreet) -- Shares of Omnicare (OCR) are falling by 0.23% to $94.73 in Thursday's morning trading session after analysts at Goldman Sachs downgraded the nursing-home pharmacy company to "neutral" from "buy" with a price target of $92.
The key catalyst for the stock, which was CVS Health (CVS) - Get CVS Health Corporation Report announcing in May that it will buy Omnicare for $12.7 billion, or $98 per share, has fully played out, analysts said.
At the time of this agreement, analysts viewed the company as an attractive investment option, given that it was a unique specialty asset and it had concentrated exposure to the aging demographic.
However, while their views have changed from the past, there are still a variety of profit growth drivers for the company, including its acceleration in generic launches, analysts noted.
Separately, TheStreet Ratings team rates OMNICARE INC as a Buy with a ratings score of A+. TheStreet Ratings Team has this to say about their recommendation:
"We rate OMNICARE INC (OCR) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income, revenue growth, good cash flow from operations and solid stock price performance. We feel its strengths outweigh the fact that the company shows low profit margins."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- OMNICARE INC has improved earnings per share by 27.1% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, OMNICARE INC increased its bottom line by earning $1.73 versus $0.74 in the prior year. This year, the market expects an improvement in earnings ($4.16 versus $1.73).
- The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Health Care Providers & Services industry average. The net income increased by 21.3% when compared to the same quarter one year prior, going from $63.77 million to $77.39 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 13.2%. Since the same quarter one year prior, revenues slightly increased by 5.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Net operating cash flow has significantly increased by 89.44% to $336.26 million when compared to the same quarter last year. In addition, OMNICARE INC has also vastly surpassed the industry average cash flow growth rate of 1.62%.
- Powered by its strong earnings growth of 27.11% and other important driving factors, this stock has surged by 51.00% over the past year, outperforming the rise in the S&P 500 Index during the same period. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.
- You can view the full analysis from the report here: OCR Ratings Report