Cardinal Health, Inc. (CAH) reported fourth quarter and full fiscal year 2009 results. For the quarter, earnings per share were 86 cents compared to 96 cents in the year-ago quarter, but in line with the Zacks Consensus Estimate. For the year, earnings per share were $3.48, lower than last year’s earnings per share of $3.75 and the Zacks Consensus Estimate of $3.50.
Quarterly results
Net sales in the quarter were roughly $25.2 billion, an increase of almost 10% year over year. The Healthcare Supply Chain Services revenues increased 11% year over year to $24.3 billion. Growth in this segment can be attributed to higher demand in the pharmaceutical supply chain business across all customer groups. Sales to bulk and non-bulk pharmaceutical customers increased 16% and 9% year over year, respectively.
Clinical and Medical Products sales in the quarter declined 12% year over year to $1.1 billion. This was due to current economic turbulence which has resulted in hospitals delaying their capital spending decisions. A strong U.S. dollar and the halting of the Alaris System shipment also contributed to the decline.
The ‘All Other’ category of revenues declined roughly 19% year over year to $0.234 billion. The company has a practice of reporting Corporate revenues, which primarily consist of inter-segment revenues. Corporate revenues in the quarter were a negative $0.5 billion, same as that in the year-ago quarter.
Gross margin declined roughly 100 basis points year over year to 5.4%. The decline was due to higher cost of goods sold that negated the effect of increased sales.
Selling, general and administrative expenses as a percentage of sales declined 40 basis points year over year to 3.5%. However, lower gross margin coupled with higher restructuring expenses were a drag on the company’s operating margin that declined 60 basis points year over year to 1.7%.
Fiscal year results
For the year, net sales came in at $99.5 billion, an increase of roughly 9% year over year. The Healthcare Supply Chain Services revenues increased 10% year over year to $95.7 billion. Growth in this segment was broad-based with sales to both bulk and non-bulk pharmaceutical customers increasing 17% and 4% year over year, respectively.
Clinical and Medical Products sales in the year declined 0.4% year over year to $4.6 billion. ‘All Other’ category of revenues declined roughly 14% year over year to $1.0 billion. Corporate revenues were a negative $1.8 billion, compared to a negative $1.9 billion in the last year.
Gross margin declined roughly 50 basis points year over year to 5.6%. The decline was due to higher cost of goods sold that offset higher sales.
Selling, general and administrative expenses as a percentage of sales declined 20 basis points year over year to 3.5%. Lower gross margin coupled with higher asset impairment and restructuring charges dragged down the operating margin by 40 basis points year over year to 1.9%.
Outlook
Management provided its outlook for the next fiscal year. Revenues are expected to grow in low single-digit. Earnings per share are expected in the range of $1.90 – $2.00. The company will spin off its Clinical and Medical Products business to form a new public company, CareFusion Corporation.
The spin-off is expected to complete on August 31. CareFusion Corporation is expected to generate earnings per share of $1.10 to $1.20 on a standalone basis.
Cardinal Health is one of the largest global healthcare companies that helps pharmacies, hospitals and ambulatory care sites focus on low-cost patient care. The company is also a leading manufacturer of medical and surgical products.
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