Hospira: a CFA Institute Investment Research Project — Presentation Detail — Celebration of Scholars

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Student presentations must have a faculty sponsor.

Abstracts must include a title and a description of the research, scholarship, or creative work. The description should be 150-225 words in length and constructed in a format or style appropriate for the presenter’s discipline.

The following points should be addressed within the selected format or style for the abstract:

A clear statement of the problem or question you pursued, or the scholarly goal or creative theme achieved in your work.
A brief comment about the significance or uniqueness of the work.
A clear description of the methods used to achieve the purpose or goals for the work.
A statement of the conclusions, results, outcomes, or recommendations, or if the work is still in progress, the results you expect to report at the event.

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Additional Information

More information is available at carthage.edu/celebration-scholars/. The following are members of the Research, Scholarship, and Creativity Committee who are eager to listen to ideas and answer questions:

Jun Wang
Kim Instenes
John Kirk
Nora Nickels
Andrew Pustina
James Ripley

Hospira: a CFA Institute Investment Research Project

Name: Herman Rodriguez
Major: Finance
Hometown: Yorkville, IL
Faculty Sponsor:
Other Sponsors:
Type of research: Course project

Name: Cortney Benson
Major: Accounting and Finance
Hometown: Crystal Lake, IL
Faculty Sponsor:
Other Sponsors:
Type of research: Course project

Name: Hunter Sandidge
Major: Finance
Hometown: Rockford, IL
Faculty Sponsor:
Other Sponsors:
Type of research: Course project

Name: Megan Shover
Major: Finance and Business Management
Hometown: Prospect Heights, IL
Faculty Sponsor:
Other Sponsors:
Type of research: Course project

Abstract

The expiration of the Precedex patent and the release of biosimilars by Hospira in 2015 could either categorize the Hospira stock as "overvalued" or "undervalued" compared to the current market price. Using the Discounted Cash Flow (DCF) and Economic Value Added (EVA) models coupled with the EV/EBITDA valuation methods, we analyze secondary data to determine this answer.

We utilize mixed methods of both qualitative (investment summary, target market factors, and key assumptions) and quantitative (ratios, financial statement analysis, WACC, and Beta calculations) approaches to conclude that the stock should be sold short through Quarter 3 of 2014. We forecast the stock will begin to increase in market value in quarter 4 of 2014 due to the opening of its Vizag manufacturing facility, the acquisition of API manufacturer Orchid, and subsequent decreases in cost of goods sold. Additionally, the reopening of Rocky Mount, its largest manufacturing site, is expected to occur in mid-2015.

The data suggests that 2014 will result in a 2% growth in net sales, but experience an overall decrease in net income. However, strong managerial strategies and decisions, lead us to conclude that Hospira is solid a long-term investment starting in Quarter 3, expected to appreciate in future years. For those with a long term blue chip focus, we calculate the intrinsic value of Hospira to be $48.41 (DCF) or $48.93 (EVA), with a floor at $38.54, and thus recommend investment.

Poster file