Leading distributor of pharmaceuticals and medical supplies
Cardinal Health, Inc.
) posted third-quarter fiscal 2013 adjusted (excluding one-time
charges and gains) earnings per share from continuing operations
of $1.20, thereby beating the Zacks Consensus Estimate of 95
cents as well as the year-ago earnings of 94 cents per share.
Net earnings from continuing operations were $346 million
($1.00 per share), up 4% year over year. Net earnings came to
Revenues in the fiscal third quarter were $24,552 million,
down 9% on a year-over-year basis, almost in line with the Zacks
Consensus Estimate of $24,635 million.
Pharmaceutical segment which is Cardinal's mainstay, witnessed
10% year over year decline in revenues, grossing $22,070 million
in the quarter, owing to branded-to-generic conversions as well
as non-renewal of contract with
Express Scripts Holding Company
). The decline was partly offset by new clients.
Sales from the smaller Medical segment clambered 3% year over
year to $2,484 million in the quarter, on the back of
acquisitions partially offset by one less selling day.
Gross margin in the fiscal third quarter edged up to 5.3% from
4.5% in the year-ago quarter. Company-wide adjusted operating
earnings increased 11% year over year to $579 million in the
Pharmaceutical segment profit surged 12% year over year to
$498 million, partly reflecting robust performance by generics.
Segment profit margin improved to 2.3%, up from 1.8% in the
Profit for the Medical segment improved 12% to $100 million
reflecting good performance of preferred offerings and lower
prices of commodities. Segment profit margin was 4% in the
quarter, higher than 3.7% in the year-ago quarter.
Cardinal exited fiscal third quarter with cash and equivalents
of about $2,305 million, down 4.4% on a year-over-year basis.
Long-term obligations (without current portion) stood at $3,714
million, on Mar 31, 2013, up 68.2% year over year.
For fiscal 2013, Cardinal raised its forecast for adjusted
earnings per share from continuing operations to a band of $3.67
and $3.71 (from $3.42 to $3.50 earlier).
In late April 2013, Cardinal Health revealed that it inked a
fresh agreement to provide pharmaceutical products to a chain of
distribution facilities and retail pharmacies of
CVS Caremark Corporation
) till the middle of 2016. The distribution facilities and stores
to be served under the latest agreement remain similar to those
served under the previous setup.
Cardinal Health is ranked among Fortune 500 companies. With
over $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 the current economic uncertainty.
Cardinal 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 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 faces tough competition across all its
business segments, which may continue to pressure pricing and
Cardinal Health currently carries a Zacks Rank #3 (Hold)
Rite Aid Corporation
) carries a Zacks Rank #2 (Buy) and is expected to do well.
CARDINAL HEALTH (CAH): Free Stock Analysis
CVS CAREMARK CP (CVS): Free Stock Analysis
EXPRESS SCRIPTS (ESRX): Free Stock Analysis
RITE AID CORP (RAD): Free Stock Analysis
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