McKesson Q2 Profit Declines, Yet Tops Estimate; Lifts FY09 Outlook

10/27/2009 6:20 PM ET

RELATED NEWS

McKesson Swings To Q3 Profit; Boosts Full Year Earnings Outlook

McKesson Turns To Profit In Q3 - Quick Facts

McKesson Corp. Q3 10 Earnings Conference Call At 5:00 PM ET

Trade MCK now with

(RTTNews) - Tuesday, healthcare services and information technology company McKesson Corp. (MCK: News ) said its second quarter profit dropped 8% from last year, hurt by higher interest and income tax expenses. Quarterly earnings, however, breezed past Wall Street expectations, as did revenues. Looking ahead, the company raised its earnings outlook for fiscal year 2010, citing positive momentum from the first half results, and the incremental demand from the impact of the flu season.

The San Francisco, California-based company reported net income for the second quarter of $301 million or $1.11 per share, compared to $327 million or $1.17 per share in the year-ago quarter.

On average, sixteen analysts polled by Thomson Reuters expected the company to earn $1.02 per share for the quarter. Analysts' estimates typically exclude special items.

For the quarter under review, net income included the positive impact of a $12 million or $0.04 per share after-tax adjustment to the litigation reserves. Prior year results were positively impacted by $0.27 per share from a tax reserve release of $76 million and $0.05 per share from the disposition of a business.

Revenues for the quarter increased 2% to $27.13 billion from $26.57 billion in the prior-year quarter. Sixteen analysts had a revenue consensus of $26.75 billion for the quarter.

Commenting on the results, the company's chairman and chief executive officer, John Hammergren said, "McKesson delivered solid results in the second quarter, with strong execution in both Distribution Solutions and Technology Solutions driving earnings growth."

In the immediately preceding quarter, McKesson reported a 23% rise in profit from the previous year, helped by strong cost controls across the company. Revenue for the first quarter declined to $26.66 billion, due to the loss of certain customers in the U.S. pharmaceutical distribution business.

Among McKesson's rivals, Owens & Minor Inc. (OMI) posted third-quarter net income of $34.69 million or $0.83 per share, up from $25.28 million or $0.61 per share reported a year ago, reflecting year-on-year improvement in revenues. Quarterly revenue increased 13.9% to $2.035 billion from $1.787 billion last year.

Another peer, AmerisourceBergen Corp. (ABC) is due to release its financial results for the fourth quarter on November 3, with analysts forecasting earnings of $0.40 per share on revenues of $18.06 billion. The company expects to achieve the higher end of the $0.34 - $0.40 per share range guidance for the fourth quarter. For fiscal 2009, AmerisourceBergen currently expects earnings from continuing operations to be at the higher end of its previously estimated range of $1.59 - $1.65 per share, and revenue growth between 1% and 3%.