Omnicare Inc. (NYSE:OCR) leads the charge today as we begin another week of options trading activities. Omnicare with its market capitalization of $9.17B is a healthcare services company. The Company specializes in the management of complex pharmaceutical care. The Company operates through two business segments, Long-Term Care Group (LTC) and Specialty Care Group (SCG), each serving a different customer population but sharing a common objective: advancing health outcomes at the lowest possible cost.
Why Are We Looking at Omnicare Today?
Omnicare has been having an impressively bullish run lately. The stock made a new 52-week trading high of $96.54 last Thursday before the stock closed with 1.72% gains at $96.26. Last Thursday’s $96.54 high stands as the sixth new high that the stock recorded this month, and it marks a 61.30% premium over its 52-week trading low of $59.85.
I am impressed with the bullish nature of Omnicare, considering the fact that the healthcare sector has been having a decently bullish run lately. It might interest you to know that the rally in Omnicare is powerful because the stock’s 50-day moving average of $82.81 is higher than its 100-day moving average of $79.14, which is in turn higher than its 200-day moving average of $72.47.
Interestingly, the stock is in a strong uptrend as an RSI index of 82.74 indicates the possibility that the stock is already in “overbought” territory. Nonetheless, the strength of its bullish technical and fundamental factors suggests that Omnicare has more room to climb higher.
Fundamentally Bullish Indications
On May 18, Omnicare reported impressively strong first quarter results that outperformed the company’s guidance and analysts’ expectations. Highlights of the first quarter results are presented below:
Omnicare reported first quarter earnings of $1.02 per share to beat the consensus estimate of $0.99 per share. The reported earnings also mark a 12.1% year-over-year growth in the company’s bottom line. Omnicare has consistently beaten estimates with an average of 1.4% upside in the last four quarters, and the company has outperformed estimates in 18 out of the last 20 quarters.
Omnicare reported first quarter revenue of $1.65B to beat the consensus estimate of $1.62B. The reported revenue marks a 5.7% year-over-year increase.
Omnicare reported growth in both of its reporting business segments. Net sales from Long-Term Care (LTC) segment increased 0.3% year-over-year to $1.19B and the company’s Specialty Care Group reported a 22.5% year-over-year increase in revenue to $465M. In addition, the Specialty Care group reported a 48% Y-O-Y growth in physician referrals, and it sports a 14% growth in average patient volumes.
The 23% growth reported in the Specialty Care Group segment shows that the segment remains a key growth driver for Omnicare. The upside potential that Omnicare has in its Specialty Care Group is evident in the massive 22.5% annual increase on revenue of $465M compared to a 0.3% annual growth on revenue of $1.65B in the
How to Trade OCR Options
I am optimistic about the prospects of Omnicare, and I strongly believe that call options will be rewarded down the road. For one, management is optimistic about the prospects of the stock as the revenue guidance for 2015 was increased by 2% —5 % at $6.5 – $6.7 billion. The earnings guidance was increased by 10% –12% at $4.08 – $4.16 per share.
I recommend buying OCR call options. You’ll do well to consider buying the OCR Sep 2015 95.000 call (OCR150918C00095000) at an asking price of $2.20.
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