Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of PharMerica Corporation (NYSE:PMC), the second-largest nursing home pharmacy in the U.S., dipped as much as 19% after the company disclosed the loss of a large client in an 8-K filed with the Securities and Exchange Commission after the bell yesterday.
So what: According to its SEC filing, PharMerica Corporation (NYSE:PMC) has been informed by Kindred Healthcare, Inc. (NYSE:KND), its largest customer, that it would not be renewing its contract for skilled nursing pharmacy services when it's due to expire on Dec. 31. Kindred Healthcare, Inc. (NYSE:KND) was responsible for 11.5% of PharMerica Corporation (NYSE:PMC)'s total revenue last year. To add insult to injury, Bank of America Corp (NYSE:BAC)/Merrill Lynch cut its price target on PharMerica Corporation (NYSE:PMC) by $1 to $17 from $18, citing the projected loss of 10% of gross profit, although it did also point to cost savings from no longer dealing with Kindred as a positive.
Now what: No magic wand is going to fix the loss of PharMerica Corporation (NYSE:PMC)'s largest customer -- at least in the short run. On paper, PharMerica Corporation (NYSE:PMC)'s story makes sense because an aging baby boomer population will soon need greater access to medical care of all forms, including within nursing facilities. However, I have to wonder if Kindred's departure is an anomaly or a trend of things to come in a highly competitive space. For now I'd suggest sticking to the sidelines and seeing how the next few quarters play out for PharMerica.
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The article Why PharMerica Shares Sank originally appeared on Fool.com.
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