Cardinal Health, Inc. (CAH) reported second quarter fiscal 2010 earnings per share of 57 cents, surpassing the Zacks Consensus Estimate of 46 cents and the year-ago earnings of 51 cents.

Sales

Total sales in the reported quarter increased 3% year over year to $24.9 billion. Growth was witnessed across all business segments. Pharmaceutical segment revenues increased 3% year over year to $22.7 billion. Growth was primarily fueled by higher sales to existing pharmaceutical distribution customers. Sales to bulk customers declined 1% year over year to $11 billion. Sales to non-bulk customers increased 7% year over year to $11.7 billion.

Medical segment revenues increased 9% year over year to $2.2 billion. Growth can be primarily attributed to higher sales to existing customers.

Margins

Gross and operating margins remained unchanged at 3.8% and 1.4%, respectively. Distribution, selling, general and administrative expenses increased 5% from the year-ago period.

Balance Sheet & Cash Flow

Cardinal Health ended the reported quarter with cash and cash equivalents of roughly $1.7 billion. Cash flow from operations was $0.5 billion.

Guidance

Based on the strong second quarter results, Cardinal Health increased its guidance for fiscal 2010. The company now expects earnings per share in the range of $2.08 to $2.18, significantly above the prior guidance of $1.90 to $2. The current Zacks Consensus Estimate for fiscal 2010 is $2.02.

The company also announced the renewal of multi-billion-dollar pharmaceutical supply chain contracts with Express Scripts (ESRX) and American Associated Pharmacies, the parent company of Associated Pharmacies, Inc. and others.

Cardinal Health, Inc. is one of the largest distributors of pharmaceuticals and medical supplies. The company’s primary competitors, AmerisourceBergen (ABC) and McKesson (MCK), recently reported December quarter results and increased their outlooks for fiscal 2010. We currently have a Neutral recommendation on Cardinal Health.

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