Cardinal's 4Q Mixed, Profit Up - Analyst Blog
August 02 2012 - 6:35AM
Zacks
Leading distributor of pharmaceuticals and medical supplies
Cardinal Health (CAH) posted fourth-quarter and
fiscal 2012 (ended June 30) adjusted (excluding one-time charges
and gains) earnings per share from continuing operations of 73
cents and $3.21 respectively, thereby beating the Zacks Consensus
Estimate of both fourth quarter and fiscal 2012 by a penny.
Earnings from continuing operations (as reported) were up about
14% year over year to $236 million (or 68 cents a share) in the
fourth quarter.
Revenues
Revenues in the fourth quarter stood at $26.8 billion, flat on a
year-over-year basis, trailing the Zacks Consensus Estimate of
$27.1 billion.
For fiscal 2012, revenues rose 5% year over year to $107.6,
missing the Zacks Consensus Estimate of $107.9 million.
Segment Highlights
The Pharmaceutical segment, Cardinal’s mainstay, posted revenues
of $24.3 billion in the quarter, a 1% year over year decrease,
owing to brand-to-generic conversions.
Sales from the smaller Medical segment improved 5% year over
year to $2.4 billion in the quarter, on the back of higher sales of
preferred offerings.
Margins
Gross margin in the fourth quarter edged up to 4.2% from 3.9% in
the year-ago quarter. Company-wide operating earnings increased 12%
year over year to $403 million in the quarter.
Pharmaceutical segment profit climbed 15% year over year to $354
million, reflecting robust performance by generics and expansion of
operations with pre-existing as well as new customers. Segment
profit margin improved to 1.46%, up from 1.26% in the prior-year
quarter.
Profit for the Medical segment increased 2% to $79 million due
to higher sales of preferred products. Segment profit margin was
3.27% in the quarter, lower than 3.38% in the year-ago quarter.
Balance Sheet and Dividend
Cardinal ended fiscal 2012 with cash and equivalents of about
$2.3 billion, up 17.9% year over year. Long-term obligations
(without current portion) increased 11.2% year over year to $2.4
billion.
The company revised its regular quarterly dividend to $0.2375
per share, reflecting an increase of 10.5%, effective from July 15,
2012.
Guidance
For fiscal 2013, Cardinal expects its adjusted earnings per
share from continuing operations in a band of $3.35 and $3.50.
Cardinal Health is ranked among the Fortune 500. With over $100
billion in annual sales, Cardinal Health 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.
The company stands to gain from the gradual shift in mix from
bulk to the higher-margin non-bulk sector of the Pharmaceutical
segment. It is also riding the generic wave. Overall, Cardinal has
benefited from a spate of tuck-in acquisitions and capital
deployment strategies.
However, the company 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 include McKesson Corp. (MCK) and
AmerisourceBergen Corp. (ABC).
We currently have a long-term Neutral recommendation on
Cardinal. The stock currently retains a Zacks #3 Rank, which
translates into a short-term Hold rating.
AMERISOURCEBRGN (ABC): Free Stock Analysis Report
CARDINAL HEALTH (CAH): Free Stock Analysis Report
MCKESSON CORP (MCK): Free Stock Analysis Report
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