Why PharMerica Corporation (PMC) Shares Sank

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.

Craving more input? Start by adding PharMerica to your free and personalized watchlist so you can keep up on the latest news with the company.

While you can certainly make huge gains in pharmacy stocks like PharMerica, the best investing approach is to choose great companies and stick with them for the long term.

The article Why PharMerica Shares Sank originally appeared on Fool.com.

Fool contributor Sean Williams owns shares of Bank of America, but has no material interest in any other companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong. The Motley Fool owns shares of, and recommends, Bank of America.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

Richest Doctors in the World

The Best Movie Sountracks Ever

The Highest Grossing Musicals on Broadway

The Most Successful Reality TV Stars

Cheapest Cities to Visit in the US

Most Expensive Summer Camps

Most Expensive Animals in the World

Most Expensive Specialty Crops in the World

Movies That Took Ages to Make

The Longest Hollywood Films Ever Made

Most Expensive Concert Stages

The Richest Bands of all Time

10 Most Corrupt Countries 2013 List

10 Countries with the Highest Quality of Life Index

Most Expensive Mattresses in the World

5 Smallest Countries by Land Area

The Ultimate Heartbreak Songs

Richest Teenagers in the World

10 Most Haunted Places in America

10 Best Places to Retire in Florida East Coast

Top 10 Places to See Before You Die

Top 8 Countries in the World Where Justice Prevails

10 Richest States in America

15 Wealthiest Countries in the World

Richest Singers in the World

Most Expensive Tasting Menu in New York City

Most Expensive Baby Items in the World

Most Expensive Hotel Suites in Vegas

Most Expensive Brunch in New York City

Most Expensive Beef Cuts in the World

25 Best Colleges to Get a Job

Top 10 US Supermarkets

The 25 Most Dangerous Cities in the World to Visit

Most Expensive Xbox Games

Top 11 Cities Where Billionaires Live

Top 10 Most Charitable Companies in America

Most Expensive Seafood in the World

The 10 Wildest Conspiracy Theories

The 10 Best Job Markets in the US

Top 10 Accounting Scandals of All Time

The 25 Biggest Cities in the World

Top 10 Best Paying Virtual Jobs

Most Expensive Leather Shoes in the World

Top 6 Things to Buy in March

The 10 Most Stressful Jobs in America – 2014 List

Top 10 Jobs for Introverted People

Top 10 Honeymoon Destinations in the World

Top 10 Highest Paying Jobs in the World

Most Expensive Day-Care in New York City

The 10 Cheapest Places to Retire Abroad

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!