Leading distributor of pharmaceutical and medical supplies,
) recently revealed that its pharma distribution agreement with
) would lapse at the end of Aug 2013.
Following the non-renewal of the contract, Cardinal guides
that its adjusted earnings per share (from continuing operations)
for fiscal 2014 will approximately be in line with its fiscal
2013 forecast of $3.42-$3.50 per share. The company will provide
more clarity to its fiscal 2014 forecast later. Its guidance for
fiscal 2013 remains unchanged as the Walgreens contract remains
in vogue during this period.
Walgreens was one of Cardinal's largest clients and accounted
for about 21% of its aggregate revenues in fiscal 2012.
Cardinal's bulk sales carry much lower margin than non-bulk
sales. Approximately 60% of Cardinal's sales derived from the
Walgreens account were bulk in nature. Furthermore, bulk and
non-bulk revenues from Walgreens carry much lower segment profit,
as a proportion of segment sales, than average sales in either
Based on factors such as overall drop in working capital, the
expiration of the Walgreens contract will benefit Cardinal's
after-tax operating cash flow.
Cardinal Health is ranked among the Fortune 500 companies.
With about $100 billion in annual sales, the company remains one
of the largest distributors of pharmaceuticals and medical
supplies in the U.S., with a diversified product portfolio, which
may partly insulate it from economic fluctuations.
Cardinal Health stands to gain from the gradual shift in mix
from bulk to the higher margin non-bulk sector of the
Pharmaceutical segment. Its mainstay Pharmaceutical segment is
heavily influenced by the generic wave. Overall, Cardinal Health
is benefiting from a spate of tuck-in acquisitions and capital
deployment strategies. The company continues to deploy capital to
boost investor confidence via share repurchases and dividend
hikes. However, Cardinal Health faces tough competition across
all its business segments, which may continue to pressure pricing
Cardinal Health currently carries a Zacks Rank #2 (Buy).
Rite Aid Corporation
) both carry a Zacks Rank #1 (Strong Boy) and are expected to do
CARDINAL HEALTH (CAH): Free Stock Analysis
PHARMERICA CORP (PMC): Free Stock Analysis
RITE AID CORP (RAD): Free Stock Analysis
WALGREEN CO (WAG): Free Stock Analysis Report
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