Despite the downgrade of its debt by Moody's, the stock has remained strong over the past few months. It has appreciated by 25% in three months. The earnings are scheduled for July 31, and will be a risky event for the stock. This is because the stock has already appreciated significantly, and any negative surprises will not be taken too kindly. The guidance for the full fiscal is not very robust as the sales are expected to decline by 2 to 4% on a GAAP basis. This is due to the expected impact of customer sales allowances associated with the company's device strategy. The adjusted diluted earnings per share is expected to be in a range of $2.00 to $2.10. Over the long term also, the revenue growth has been tepid, and the net income has declined. It reported a net loss in the last quarters and the revenues declined by around 8.5%. Future growth in revenues will require launch of innovative products and devices. The strong competitors like Baxter International (BAX) are known for innovation, and it is important that the company delivers on this front. The R&D expenditure increased in 2012, and the company has several products in the pipeline. However, the timing and impact of the new launches remains to be seen. Medical devices / pharmaceuticals industry is heavily dependent on new launches as patent expirations lead to sudden drop in sales due to influx of generic drugs in the market. Even Hospira is expected to face this problem going forward. Even a small medical device company PLC Systems (PLCSF) has made a mark for itself based on its innovative product RenalGuard which has received US / European patents. Hospira has to deliver good numbers in the next earnings, and also improve its performance over the long term. Otherwise, it may be difficult to maintain the positive momentum.
