Cardinal profit rises; 2013 forecast is below estimates
(Reuters) - Drug wholesaler Cardinal Health Inc (CAH.N) said on Thursday its fiscal fourth-quarter earnings rose 16 percent, driven by strong sales of generic drugs and increased business from new and existing customers.
But the company issued a profit forecast for fiscal 2013 that was below analysts' expectations, due in part to the loss of business from pharmacy benefits manager Express Scripts Holding Co (ESRX.O). Cardinal shares were down 2.1 percent.
Express Scripts is replacing Cardinal with rival wholesaler AmerisourceBergen Corp (ABC.N) at the beginning of October.
Net profit in the fourth quarter, ended June 30, rose to $236 million, or 68 cents a share, from $202.7 million, or 57 cents a share, a year earlier. An accounting change during the year means the year-ago figure was restated to 58 cents a share, the company said.
Earnings from continuing operations, excluding one-time items, were 73 cents a share, a penny higher than the average estimate of analysts polled by Thomson Reuters I/B/E/S.
Revenue was unchanged at $26.8 billion as increased sales of medical products were offset by decreased revenue from its pharmaceuticals business. Analysts were expecting $27.3 billion.
Revenue was flat because a large number of branded pharmaceuticals lost patent protection and were launched as generics. Generic drugs sell for less but are more profitable.
As a result, overall profit in the pharmaceuticals business rose 15 percent, even as revenue fell 1 percent.
In the coming year, the company said it expects revenue to fall 7 percent, due in part to the loss of Express Scripts and in part to the fact that more drugs are expected to lose patent protection.
On a conference call with analysts, Cardinal said it does not expect as much of a profit "uplift" in fiscal 2013 as in 2012 but still expects the pharmaceutical segment to grow and margins to increase.
The Dublin, Ohio-based company forecast earnings for fiscal 2013, excluding one-time items, of $3.35 to $3.50 a share. Analysts were expecting $3.54 a share, on revenue of $105.8 billion.
Analysts estimate the loss of Express Scripts' business will reduce Cardinal's earnings by 2 to 4 cents a share in fiscal 2013.
Cardinal's contract with pharmacy chain Walgreen Co (WAG.N) expires at the end of August 2012, and its contract with CVS Caremark Corp (CVS.N) expires at the end of June 2012.
George Barrett, the company's chief executive, declined in an interview to say whether the company would be aggressive in its bidding for new Walgreen and Caremark contracts, but said Cardinal is "extremely efficient."
"We've been serving these customers for many years, we're attuned to their needs and complexity, and we offer them a broad range of services," he said.
In the medical segments business, which includes the sale of medical, surgical and laboratory products such as surgical gowns, vials, plastic gloves and instruments, fourth-quarter profit rose 2 percent while revenue rose 5 percent.
Cardinal shares were down 90 cents to $41.63 in morning trading on the New York Stock Exchange.
(Reporting By Toni Clarke; Editing by Maureen Bavdek and John Wallace)