HSP

Hospira Inc. (HSP) is all set to announce its second-quarter 2012 results before the market opens on August 1, 2012. The Zacks Consensus Estimate for the second quarter of 2012 is 49 cents, reflecting an estimated year-over-year decline of 47.9%. The slowdown in production at Hospira’s facility in Rocky Mountain, North Carolina, is expected to continue impacting earnings.

First-Quarter Recap

Hospira’s first-quarter 2012 earnings (excluding special items) of 47 cents per share edged past the Zacks Consensus Estimate of 46 cents. However, earnings fell short of the year-ago figure by 49.5% due to lower revenues and higher costs. On a reported basis (including special items), the company earned 24 cents per share, down 72.7%.

Hospira came up with revenues of $966 million in the first quarter, comfortably beating the Zacks Consensus Estimate of $951 million. Revenues were, however, 3.6% lower than the year-ago figure of $1.0 billion. (Read our full coverage of the first quarter earnings report at Hospira Beats by a Penny, Backs View ).

Agreement of Estimate Revisions

Over the last 30 days, 3 of the 15 analysts covering Hospira for the second quarter of 2012 have trimmed their earnings estimates with no upward movement. Similar downward trends have been observed in earnings estimates movements over the last 30 days for fiscal 2012 and fiscal 2013.

We believe that the ongoing manufacturing issues at the company’s Rocky Mountain facility are primarily responsible for the downward bias. Even though Hospira is working hard to resolve the issue, it will remain a major overhang on the stock, until fully resolved.

Magnitude of Estimate Revisions

Given the downward bias in earnings estimate revisions over the last month, earnings estimates for the second quarter, fiscal 2012 and fiscal 2013 have gone down by a penny and 2 cents each, respectively. Earnings estimates for the second quarter, fiscal 2012 and fiscal 2013 currently stand at 49 cents, $2.11 and $2.65 respectively.

Surprise History

Hospira has surpassed earnings estimates in two of the last four quarters, in addition to reporting in line earnings in the other two quarters. On average, the earnings surprise was 16.92%.

Our Recommendation

We have a Neutral recommendation on Hospira. The stock carries a Zacks #3 Rank (Hold rating) in the short run.

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