NEW YORK (TheStreet) -- Shares of healthcare services company Omnicare Inc. (OCR) are up by 1.33% to $95.89 in pre-market trading on Thursday, after pharmacy and healthcare retailer CVS Heath (CVS) announced that it has agreed to acquire Omnicare for $98 per share in cash, for a total enterprise value of approximately $12.7 billion.
The acquisition allows CVS to "significantly expand" its ability to distribute prescriptions in facilities offering assisted living and long term care. CVS stock is up by 0.66% to $101.94 in pre-market trading.
The board of both companies have approved the merger, which still needs endorsement from Omnicare's stockholders. The deal is expected to close at the end of the year, pending regulatory authorization.
"We are pleased to have reached this agreement with CVS Health, one of the leading companies in the health care industry, which we believe will allow us to accelerate our mission of enhancing the quality and cost-effectiveness of care for complex patient populations," Omnicare CEO Nitin Sahney said in a statement.
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 13.3%. 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 1.32%.
- Powered by its strong earnings growth of 27.11% and other important driving factors, this stock has surged by 49.13% 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