From Abbott Labs (ABT) acquiring Solvay SA (SVYSY) to Dell (DELL) acquiring Perot Systems (PER), merger mania seems to be back in full swing on Wall Street.
This is good news for investors. It means companies are spending money again. That’s a big change. Just a few months ago, businesses weren’t spending money on anything, no matter what the price. It also indicates that there is plenty of cash on the sidelines just waiting for the right opportunity to come up.
Who will be next? Take a look at the health care sector. You want to find companies that are financially strong and will be a good fit for bigger companies.
My next choice: SXC Health Solutions (SXCI).
SXC Health Is in the Right Place at the Right Time
SXC Health Solutions makes information management software applications for the pharmaceutical supply industry.
The company provides benefit management software and related information technology services to retail and mail-order pharmacies, state and federal government agencies, managed care organizations and self-insured employer groups.
SXCI’s software offerings include its online claims processing flagship product, RxCLAIM, as well as products for pharmacy data warehousing, rebate management and web portal deployment. The company is in the business of providing patients, doctors and pharmacists with the information necessary to make good decisions and save money. This is a crucial business, especially in an environment like this.
SXC Health Solutions operates primarily in the U.S., but also serves selected markets in Canada.
In the second quarter, the company’s earnings rose to $12 million or 47 cents per share, compared with $3.3 million, or 14 cents per share, in the same quarter a year ago. Excluding one-time charges, SXC Health Solutions’ operating earnings were 53 cents per share.
Over the past four quarters, the company’s sales are up 41% to $320.8 million. The folks on Wall Street were expecting earnings of 25 cents per share on sales of $301.2 million, so the company posted a whopping 112% earnings surprise and a 6.5% sales surprise. The day after the earnings report came out, the stock jumped 26%!
Don’t think you’re late to the party. Looking forward, SXC Health Solutions raised its 2009 earnings outlook to $1.62 to $1.70 per share on sales of $1.35 billion to $1.4 billion. This is up from its prior forecast and higher than consensus. The next earnings report is about a month away. I expect it to be good news. SXC Health Solutions is an excellent buy.
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