Incremental Revenue Rise, Flat Earnings Highlight Q2 at CareFusion

CareFusion Corporation posted flat adjusted earnings and a minimal rise in revenue during its second fiscal quarter, ended Dec. 31, 2013.

The company’s earnings per share of 54 cents remained unchanged from the same fiscal quarter a year ago and were in line with the Zacks Consensus Estimate. However, adjusted net earnings fell 4.1 percent to $116 million from $121 million in 2013.

On a reported basis, earnings per share declined 6.25 percent or 45 cents per share from 48 cents and net earnings slipped 10.2 percent to $97 million from $108 million in the second quarter of fiscal 2013.

Revenues in the quarter rose 1.4 percent (both in reported and constant currency) to $922 million, topping the Zacks Consensus Estimate of $912 million. The increase was driven by rise in Procedural Solutions revenues.

Adjusted operating expenses inched up 2.1 percent to $288 million from $282 million a year ago, due to the 2.3 percent medical device excise tax. Consequently, adjusted operating income fell 4.2 percent to $181 million from $189 million a year ago while adjusted operating margin ebbed 120 basis points to 19.6 percent from 20.8 percent a year ago.

Revenues from Medical Systems slid 2.5 percent to $587 million as strong performance in the infusion systems business was offset by weakness in the respiratory technologies and the impact of a product line transition in dispensing technologies businesses.
Segment profit ebbed 11.4 percent to $109 million from $123 million in the prior-year quarter as revenue mix negatively affected segment margins. Adjusted segment profit dipped 7.5 percent to $124 million from $134 million in the year-ago quarter.

Revenues from Procedural Solutions rose 9.1 percent to $335 million, driven by double-digit revenue increases in both the infection prevention and specialty disposables businesses. However, segment profit fell 10.4 percent to $43 million, though on an adjusted basis, segment profit grew 3.6 percent to $57 million from $55 million in the prior-year quarter.

CareFusion’s board of directors approved a two-year $750 million share repurchase program, after completing their previous $500 million authorization in June last year. Under the present authorization, the company repurchased 4.8 million shares for $186 million in the fiscal second quarter, bringing total repurchase of 9.8 million for $375 million for the first half of fiscal 2014.

CareFusion had cash and cash equivalents of $1.3 billion as of Dec. 31, 2013, down marginally from $1.8 billion as of June 30, 2013. Total debt was almost flat at $1.46 billion as of Dec. 31, 2013, compared with $1.45 million as of June 30, 2013. As a result, debt to capitalization ratio rose marginally by 20 basis points to 21.4 percent from 21.2 percent as of June 30, 2013.

In the first half of fiscal 2014, cash flow from operating activities rose 15.6 percent to $297 million from $257 million in the same period of 2013. Capital expenditure declined 7.5 percent to $37 million from $40 million in the same period of fiscal 2013.

CareFusion reiterated its revenues and earnings guidance for fiscal 2014. The company expects revenues to grow between 4 percent and 7 percent, and organic revenues to rise between 1 percent and 4 percent, both on a constant currency basis.

CareFusion expects revenue growth in the range of 1 percent to 4 percent in the Medical Systems segment driven by strong performance of infusion systems business, and 2 percent to 4 percent (13-15 percent including acquisitions) in the Procedural Solutions segment based on anticipated strong growth in all businesses.

Adjusted earnings are also expected to lie in the previously guided range of $2.30 to $2.40 per share.