Leading distributor of pharmaceuticals and medical supplies
) posted first-quarter fiscal 2013 adjusted (excluding one-time
charges and gains) earnings per share from continuing operations
of 81 cents, thereby beating the corresponding Zacks Consensus
Estimate by a couple of cents as well as the year-ago earnings of
73 cents per share.
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Earnings from continuing operations (as reported) increased 15%
year over year to $272 million (or 79 cents a share) in the first
quarter. Net earnings were $271 million, up 15% year over year.
Revenues in the first quarter were $25,889 million, down 3% on a
year-over-year basis, trailing the Zacks Consensus Estimate of
$26,587 million. The decline in revenues was in-line with
Cardinal's expectation due to the prominent brand-to-generic
conversions in the pharmaceutical industry.
Pharmaceutical segment which is Cardinal's mainstay, witnessed 4%
year over year decline in revenues, grossing $23,498 million in
the quarter, owing to brand-to-generic conversions. The
improvement in specialty solutions volume and new customers
partially negated the impact of the conversions.
Sales from the smaller Medical segment clambered 1% year over
year to $2,393 million in the quarter, on the back of higher
sales of preferred offerings and contributions from the Futuremed
Gross margin in the first quarter edged up to 4.5% from 4.0% in
the year-ago quarter. Company-wide operating earnings increased
11% year over year to $457 million in the quarter.
Pharmaceutical segment profit surged 10% year over year to $400
million, reflecting robust performance by generics. Segment
profit margin improved to 1.70%, up from 1.49% in the prior-year
Profit for the Medical segment dipped 6% to $74 million due to
decline in volume and issues associated with information systems.
Segment profit margin was 3.11% in the quarter, lower than 3.32%
in the year-ago quarter.
Cardinal exited first quarter with cash and equivalents of about
$2,440 million, up 21.4% year over year. Long-term obligations
(without current portion) increased 9.7% year over year to $2,408
For fiscal 2013, Cardinal reiterated its forecast for adjusted
earnings per share from continuing operations in a band of $3.35
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 margins. Its
major competitors in the pharmaceutical supply chain segment
We currently have a long-term 'Neutral' recommendation on
Cardinal. The stock carries a Zacks #3 Rank, which translates
into a short-term Hold rating.