Cardinal Health Reports Second Quarter Results, Revises EPS Outlook

DUBLIN, Ohio, Jan. 29 /PRNewswire-FirstCall/ -- Cardinal Health , a global provider of products and services that improve the safety and productivity of health care, today reported a revenue increase of 7 percent to $23 billion during its second...


DUBLIN, Ohio, Jan. 29 /PRNewswire-FirstCall/ -- Cardinal Health , a global provider of products and services that improve the safety and productivity of health care, today reported a revenue increase of 7 percent to $23 billion during its second quarter, with earnings per share (EPS) rising 16 percent to $0.89. On a non-GAAP basis, EPS for the quarter ended Dec. 31 grew 8 percent to $0.90(1).

The company also announced a revision to its full year EPS outlook based on several factors affecting its largest operating segment in the second half of the year. Cardinal Health now expects non-GAAP EPS to be in a range of $3.75 to $3.85 for the year, an increase of 10 percent to 13 percent over the prior year.

"We have three of our four operating segments performing on track, showing favorable revenue growth, expanding margins and segment profit that is at or above our guidance for the current year," said R. Kerry Clark , chairman and chief executive officer of Cardinal Health . "Within our supply chain pharmaceutical segment, we have revised our forecast to account for the impact of anti-diversion measures for controlled substances, changes in our expectations for branded price increases and the generics market, and the effect of contract repricings. We still expect double-digit EPS growth for the year and are resolved to strengthen the business as we fix the issues that have hampered our performance.

"We continue to engage in discussions with the DEA to resolve matters affecting three of our pharmaceutical distribution centers regarding the diversion of controlled substances," Clark added. "More broadly, in the past 45 days we have been working to put in place an enhanced system of controls across our network to address the security threat that diversion poses to the pharmaceutical supply chain. The impact of these issues may cost more than $30 million for this fiscal year, but the safety and security of the pharmaceutical supply chain is core to our business and its protection is an important public policy priority for all of us."

Healthcare Supply Chain Services Sector

Revenue in the Healthcare Supply Chain Services-Pharmaceutical segment grew 6 percent during the quarter to $20.4 billion, with sales to non-bulk customers increasing 1 percent to $10.7 billion and sales to bulk customers increasing 12 percent to $9.7 billion. Segment profit declined 21 percent to $258 million, driven by the timing of branded price increases, conditions in the market for generic pharmaceuticals, and the repricing of several large contracts. Results were also dampened by the impact of suspensions to distribute controlled substances from three facilities and enhancements to anti-diversion programs being implemented across the company's entire distribution network. The company continues to expect segment profit to improve in the second half of the fiscal year. Following the close of the quarter, Cardinal Health also completed an early renewal of a three-year, multi-billion-dollar agreement with Walgreens to distribute pharmaceuticals to more than 6,000 drug stores nationwide.

The Healthcare Supply Chain Services-Medical segment saw revenue growth of 8 percent to $2 billion, with increased sales momentum from the prior quarter to hospital, laboratory and ambulatory care customers. Segment profit declined 13 percent to $72 million, primarily driven by a previously disclosed change in corporate cost allocation that reduced segment profit by 7 percentage points and softness in the surgical kitting business. The company continues to expect the segment to return to year-over-year profit growth in the second half of the year from strength in the hospital and laboratory supply businesses.

Clinical and Medical Products Sector

This content continues onto the next page...