WASHINGTON (dpa-AFX) - McKesson Corp. (MCK) Thursday reported a drop in second-quarter profit, due mainly on acquisition-related expense. Adjusted earnings rose from last year on revenue growth of 9 percent. Both adjusted earnings and revenue for the quarter came in ahead of Street estimates. Looking ahead, the company also raised its earnings outlook for the full year.
For the second quarter, McKesson's net income dropped 4 percent to $286 million from $298 million in the year-ago period. Nevertheless, earnings per share for the quarter improved to $1.15 on 249 million shares from $1.12 last year on 266 million shares.
Adjusted earnings for the quarter improved to $323 million from $315 million last year. Adjusted earnings per share were $1.27 compared with $1.16 last year.
On average, 18 analysts polled by Thomson Reuters expected earnings of $1.14 per share for the quarter. Analysts' estimates typically exclude special items.
Among the items excluded for adjusted earnings, acquisition-related expense was $7 million for the reporting period. Amortization of acquisition-related intangibles totaled $30 million for the quarter and $17 million last year.
Revenues for the quarter grew 9 percent to $29.980 billion from $27.450 billion in the year-ago quarter. Eighteen Street analysts had a consensus revenue estimate of $29.040 billion for the quarter.
McKesson operates through two segments, Distribution Solutions and Technology Solutions. The Distribution Solutions segment distributes drugs and equipment, and provides specialty pharmaceutical solutions for biotech and pharmaceutical manufacturers. The Technology Solutions segment offers enterprise-wide strategic management software solutions, and connectivity, outsourcing and other services to healthcare organizations.
Distribution Solutions revenues were up 9 percent for the quarter on growth in U.S. pharmaceutical direct distribution and services revenues, and the acquisition of US Oncology. Gross profit improved from the acquisition.
Technology Solutions revenues were up 6 percent for the quarter, aided by stronger than expected progress on achieving certain customer implementation milestones.
Operating profit as a percentage of revenues dropped to 1.76 percent from 1.94 percent for Distribution Solutions. For Technology Solutions, they improved to 14.84 percent from 10.54 percent last year. The margin is on an adjusted basis, excluding items.
Interest expense for the quarter was $64 million, compared with $43 million last year.
During the quarter, McKesson entered into an accelerated share buyback agreement to repurchase $650 million of common stock, leaving $850 million on its current share repurchase authorization.
Due to the lower tax rate, McKesson raised its earnings outlook for the full year, and now expects adjusted earnings between $6.09 and $6.29 per share for the fiscal year ending March 31, 2012. The Street currently expects full-year earnings of $6.11 per share.
The prior guidance had been in a range of $5.99 to $6.19 per share. The guidance excludes about $0.47 in amortization of acquisition-related intangible assets, and about $0.07 in acquisition-related expenses
MCK closed Thursday's regular trading at $79.60, down $0.95 or 1.18%, on the NYSE. In the after-hours, the stock is gainng $3.10 or 3.89%. Over the past year, the stock traded in a range of $57.81 - $87.32.
Copyright RTT News/dpa-AFX