Thursday, health care services company Cardinal Health Inc. (CAH) reported second-quarter results that topped Wall Street's expectations, due in part to the company's progress on its key initiatives and customer focus across its businesses. The company also raised its profit forecast for full year fiscal 2010.
For the second-quarter ended December 31, 2009, the company's GAAP earnings from continuing operations increased to $230 million or $0.64 per share from $169 million or $0.47 per share in the year-ago quarter.
The company's GAAP earnings from continuing operations include restructuring and employee severance, impairments and loss on sale of assets, litigation (credits)/charges, net, other spinoff costs, and gain on sale of CareFusion stock.
Excluding items, Cardinal Health's non-GAAP earnings from continuing operations for the quarter rose to $207 million or $0.57 per share from $183 million or $0.51 per share in the year-ago quarter. On average, 17 analysts polled by Thomson Reuters expected the company to earn $0.46 per share. Analysts' estimate typically excludes one-time items.
Cardinal Health's net earnings, which include discontinued operations, dropped to $234.5 million or $0.65 per share in the second-quarter of fiscal 2010 from $316.5 million or $0.88 per share in the year-ago quarter. The year-ago quarterly earnings included the results of CareFusion Corp., a wholly owned subsidiary of Cardinal Health. The spinoff of CareFusion was completed last September.
The company's quarterly revenue totaled $24.9 billion, reflecting a 3% rise over $24.1 billion in the year-ago comparable quarter. Wall Street analysts had a consensus revenue estimate of $24.77 billion.
Cardinal Health now has two reportable segments - Pharmaceutical and Medical.
The pharmaceutical segment's profit declined 1% to $260 million as a result of fewer significant generic product launches, compared to prior year, the effect of customer contract repricings within the pharmaceutical distribution business and the expected impact from the Medicine Shoppe International franchisee contract transition.
Through its Medicine Shoppe International, Inc. and Medicap Pharmacies Incorporated franchise operations (collectively, "Medicine Shoppe"), Cardinal Health earns franchise and origination fees. Franchise fees represent monthly fees that are either fixed or based upon franchisees' sales and are recognized as revenue when they are earned. Origination fees from signing new franchise agreements are recognized as revenue when the new franchise store is opened.
However, the segment's revenue for the quarter increased 3% to $22.7 billion, primarily driven by increased sales to existing pharmaceutical distribution customers.
The medical segment's quarterly profit grew 38% to $103 million, primarily driven by the sales growth and decreased cost of raw materials associated with commodity price movements, the company noted. The segments revenue for the quarter increased 9% to $2.2 billion.
For the six-month period, the company's GAAP earnings from continuing operations declined to $168.4 million or $0.47 per share from $341 million or $0.95 per share in the year-ago period.
On a non-GAAP basis, earnings from continuing operations for the six-month period rose to $401 million or $1.11 per share from $351 million or $0.97 per share in the comparable period a year before.
The company's revenue for six months totaled $49.7 billion, up from $47.55 billion in the comparable period a year before.
During the second-quarter, Cardinal Health renewed multi-billion-dollar pharmaceutical supply chain contracts with Express Scripts Inc. (ESRX) and American Associated Pharmacies, the parent company of Associated Pharmacies, Inc. and United Drugs and largest cooperative of independent pharmacy owners.
Based on its year-to-date performance and assessment of the current environment, Cardinal Health raised its non-GAAP earnings outlook for full-year fiscal 2010 to a range of $2.08-$2.18 per share from its prior guidance of $1.90-$2.00 per share range. Wall Street analysts have earnings estimate pegged at $2.03 per share for fiscal 2010.
CAH, which has been trading in the range of $24.87-$39.87 over the past twelve months, closed Wednesday's trading at $31.31. In pre-market trading Thursday, the stock is currently up 4.12% to $32.60.
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