Cardinal Health's profits increased in the second quarter thanks to market growth in its pharmaceutical segment and contributions from recent acquisitions.
The Dublin, Ohio-based pharmaceutical and medical products distributor reported $326 million in earnings during the second quarter, up 13% from $289 million last year. The positive results follow the close of several major acquisitions in fiscal 2015, including Livonia, Mich.-based Harvard Drug Group and Cordis, a former Johnson & Johnson cardiology device subsidiary.
Total revenue was up 23% at $31.4 billion, thanks in large part to strong pharmaceutical revenue growth of 25%. Six-month revenue was up 20% at $59.5 billion, while profit was up 28% at $709 million.
Pharmaceutical revenue was $28.3 billion, while the segment's profit was up 16% at $627 million. Growth in Cardinal's pharmaceutical segment was thanks to growth from existing and new customers, as well as acquisitions.
Cardinal also acquired the specialty pharmaceutical distribution business of Nashville-based Metro Medical Supply last year. Specialty pharmaceuticals saw double-digit growth for Cardinal this quarter, and they have become a priority for Cardinal and other distributors as spending in that market has grown.
Cardinal CEO George Barrett noted that generic drug pricing has been somewhat steeper than previously expected, but stressed that generics represent just one part of the company's business, through its Red Oaks Sourcing joint venture with CVS Health Corp.. "Our solid work in sourcing, attracting new customers, penetrating existing customers, utilizing data and analytics, and executing on launches has been key to our long-term success,” Barrett said.
Cardinal's medical-segment revenue increased 9% to $3.2 million, thanks to recent acquisitions as well as growth in the company's Cardinal Health at Home platform, which offers direct-to-home sales of medical products. Medical-segment profit dropped 8% to $106 million, with growth offset by a tax-related adjustment from the Cordis acquisition. Excluding that $21 million impact, segment profit growth was 10%.
Low oil prices have provided immediate savings for distributors and health systems when it comes to vehicle fuel, but Cardinal Chief Financial Officer Mike Kaufmann told investors it will take a few years for the medical product market to feel that impact. He reminded investors that not all of Cardinal's commodity supplies are produced with oil.
Cardinal is reaffirming its fiscal 2016 guidance of $5.15 to $5.35 a share, representing an 18% to 22% growth rate compared to fiscal 2015.