UBS Reiterates a 'Buy' on Lincare Holdings (LNCR); A New Gross Margin Profile?

UBS reiterates a 'Buy' on Lincare Holdings (NASDAQ: LNCR), PT lowered from $37 to $35.

UBS analyst says, "LNCR's 2Q revenue of $449 mil (UBSe: $447 mil) grew 7%, but higher than anticipated costs lead to an EPS miss. COGS of $142 mm came in nearly 9% higher than forecast (+$18 mil sequentially), due to in large part to the specialty pharmacy business. Other new initiatives, such as anti-coagulation testing, also may have pressured margins. It appears we underestimated the negative margin impact of LNCR diversifying its business and as such, have lowered our 2011 GM estimate to 69% from 71% (2010 GM: 73%) and reduced our EPS estimates." (UBS lowers FY11 EPS estimate from $2.10 to $1.90 and FY12 from $2.40 to $2.28)

"Competitive Bidding Newsflow May Drive Stock Performance - While we expect the stock to be weak on this report, part of our longer-term view is that LNCR shares may be catalyzed by potentially positive newsflow concerning round 2 of competitive bidding, resulting in a more orderly bid process."

For more ratings news on Lincare Holdings click here and for the rating history of Lincare Holdings click here.

Shares of Lincare Holdings closed at $28.49 yesterday.

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