IMS Health Reports In Line

IMS Health (RX: 21.84 -0.01 -0.05%) reported fourth-quarter earnings per share (EPS) of 39 cents, in line with the Zacks Consensus Estimate. However, after adjusting for charges related to restructuring initiatives, asset impairment and others, EPS came in at 52 cents compared to 50 cents in the year-ago period. For the full year of 2009, IMS reported an EPS of $1.73 after adjustments compared to $1.70 in 2008.
 
Revenues during the reported quarter came in at $599.2 million, an increase of 3% compared to the corresponding period last year. This is an improvement from the third quarter when curtailed spending by clients due to the economic downturn brought down revenues by 6%. For 2009, revenues came in at $2.18 billion, down 6% compared to $2.32 billion in 2008.
 
IMS categorizes its revenue under three business lines – Commercial Effectiveness, Product and Portfolio Management and New Business Areas, accounting for 52%, 30% and 18%, respectively to total revenues during the reported quarter. While revenues from New Business Areas recorded a year-over-year decline of 3% ($107.3 million), revenues from Commercial Effectiveness and Product and Portfolio Management increased 8% ($310.9 million) and 3% ($181 million), respectively. 

Operating income for the quarter was $106.3 million, down 16% from the year-ago period. IMS did not undertake any share repurchases during the quarter even though 9.5 million shares remain authorized and are available for repurchase. Preliminary free cash flow was $138 million bringing the total for the full year to $543.1 million. The company exited the quarter with $380.3 million in cash and cash equivalents. Total debt declined to $1,244.7 million compared to $1,404.2 million at the end of 2008. 

Earlier this week, IMS announced that its shareholders have approved the merger agreement which paves the way for its acquisition by private equity firms, TPG Capital and CPP Investment Board. Under the agreement, which is expected to close during the first quarter of 2010, the company’s shareholders will receive $22 per share in cash for each share of common stock. We have a Neutral rating on the stock.