SAN FRANCISCO - Prescription drug distributor McKesson Corp. said Thursday that one-time expenses sent its third-quarter profits sharply lower despite a double-digit increase in sales.
At 68 cents per share, McKesson's profit fell well short of the average estimate of analysts surveyed by Thomson Financial of 80 cents per share for the third quarter. The company's forecast for fiscal 2008 earnings also fell short of Wall Street predictions.
Profits for the year probably will be in the range of $3.22 to $3.32 per share, the company said. Analysts have predicted earnings of $3.33 per share for the fiscal year ending in March.
The San Francisco-based company said it earned $201 million during the three months ended in December, down 17 percent compared to net income of $243 million, or 80 cents per share, over the same period last year.
McKesson's quarterly revenue rose nearly 15 percent to $26.49 billion, up from $23.11 billion a year ago, driven by a sizable jump in U.S. and Canadian drug sales.
The nation's largest prescription drug distributor said third-quarter earnings suffered from one-time charges equal to 11 cents per share for restructuring, severance and pending legal settlements.
The company also said two of three major generic drugs that drove earnings in the previous third quarter had lower profit margins in 2007 and the third, a generic version of the blood thinner Plavix, went off the market.
Thursday's results marked the first time in almost two years that McKesson did not top analysts' earnings forecasts.
Overall, investors have been bullish on McKesson, whose shares closed at a 52-week high earlier this month after climbing more than 27 percent in 2007.
Industry watchers have said drug distributors could get a lift in 2008 as more generic versions of popular high-cost drugs hit the market and an aging population boosts Medicare rolls.
"We have a great business at a great time," said McKesson chairman and chief executive John Hammergren in a conference call with analysts Thursday.
Company executives tried to cast the disappointing earnings results in a positive light, saying McKesson was on track to meet its full-year goals despite the hit taken from the third-quarter charges.
They also voiced little concern about the possible impact of a recession on the drug distribution business, an industry traditionally sheltered from the effects of an economic downturn.
After the company released the earnings report after trading ended Thursday, its stock slipped but then rebounded in after-hours trading to hover just below the closing price $62.84.
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