Cardinal Health Outperforms – Analyst Blog

Cardinal Health, Inc. (CAH) reported third quarter fiscal 2010 earnings per share of 61 cents, outperforming the Zacks Consensus Estimate of 57 cents. However, earnings were lower than the year-ago figure of 66 cents.

 Sales

Total sales in the third quarter increased 1% year over year to $24.3 billion. Growth was witnessed across all business segments.

Pharmaceutical segment revenues increased 0.5% year over year to $22.2 billion. Growth was fueled by higher sales to bulk and non-bulk customers. Sales to bulk customers increased 0.5% year over year to $10.9 billion. Sales to non-bulk customers increased 0.5% year over year to $11.3 billion.

Medical segment revenues increased 7% year over year to $2.1 billion. Growth can be primarily attributed to higher sales to existing domestic customers and strong performance of the company’s Canadian business unit.

Gross margin remained roughly flat year over year at 4.1%. Operating margin declined 10 basis points year over year to 1.5%.

Cardinal Health ended the third quarter with cash and cash equivalents of roughly $2.64 billion. Cash flow from operations was $879.4 million in the reported quarter.

Based on the company’s strong year-to-date results, Cardinal Health has increased its guidance for fiscal 2010. The company now expects adjusted earnings per share in the range of $2.15 to $2.20, above the prior guidance of $2.08 to $2.18.

Cardinal Health expects adjusted earnings per share in fiscal 2011 to range between $2.35 and $2.45.

Cardinal Health is one of the largest distributors of pharmaceuticals and medical supplies. The company’s primary competitors are AmerisourceBergen Corporation (ABC) and McKesson Corporation (MCK).

 We currently have a ‘Neutral’ recommendation on Cardinal Health.