Corporate earnings

Diversification helps boost Cardinal Health net by 25%

By

November 1, 2013

Cardinal Health’s commitment to diversifying its business model appears to be paying off, as the Dublin-based company reported net income for its first fiscal quarter rose 25 percent despite a drop in revenue.

Revenue was down 5 percent to $24.5 billion, largely because it lost a $22 billion-a-year contract with Walgreen that ended Aug. 31 and a $9 billion contract with Express Scripts that ended Sept. 30.

“Our business has been rebalancing for some time now,” said Cardinal CEO George Barrett.

Areas of growth, he said, have been its partnerships with independent pharmacies, the distribution of generic drugs and specialty medicines, and its entry into the home health-care market with the purchase of AssuraMed in February for $2.1 billion.

The profit margins from these business lines are generally higher than in some of its other business segments.

Cardinal’s revenues from its operations in China were up about 30 percent in the quarter. The company did not release the quarterly total, but revenue was about $2 billion last year.

Earnings were 99 cents per share, beating analysts’ predictions. Cardinal was helped by tax credits valued at 18 cents per share.

Barrett said the company has raised its earnings-per-share expectations for the year to a range of $3.62 to $3.72, up from $3.45 to $3.60.

“I’d absolutely say they’ve diversified, and I think there will be more to come,” said Ross Muken, an analyst with ISI Group. “Their business is executing very well.”

Cardinal shares hit a 52-week high of $59.10 yesterday and closed at $58.66, up $2.98, or 5.4 percent.

Barrett said additional acquisitions are possible in the coming months in this country and perhaps beyond, as the company continues to diversify.

“We’re well-versed in most markets around the world. There’s very little we don’t explore,” he said. “We’ll stay open-minded and look for ways to create value for our customers, suppliers and shareholders.”

Barrett dismissed rumors that he is a candidate to replace Teva Pharmaceutical Industries CEO Jeremy Leven, who stepped down this week.

Barrett was the company’s CEO of North American operations when he left to come to Cardinal in 2008.

“I’ve made the very public comment that I was not a candidate,” he said. “I’m having a great time leading Cardinal Health and am very committed to our continued success.”

swartenberg@dispatch.com

@stevewartenberg