Cardinal Health Falls After Losing Walgreen Drug Contract
Cardinal fell 8.2 percent to $42.35 at the close in New York, its largest one-day decline since June 2, 2009. The shares have gained 2.7 percent in the past 12 months.
The contract with the largest U.S. drugstore chain expires at the end of August and won’t be renewed, Dublin, Ohio-based Cardinal said today in a statement. The move won’t hurt earnings for the 2013 fiscal year ending in June. Walgreen and Alliance Boots GmbH said they agreed to a partnership with AmerisourceBergen Corp. (ABC) to distribute drugs in a 10-year deal.
“We anticipate that investors’ sense of urgency to buy into shares could be limited for now,” Thomas Gallucci, an analyst with Lazard Capital Markets in New York, said in a note to clients. Gallucci downgraded his rating on Cardinal’s stock to neutral.
Cardinal will target a 2014 diluted earnings per share similar to its fiscal 2013 forecast of $3.42 to $3.50 provided on Feb. 5, George Barrett, the company’s chairman and CEO, said in a statement.
“Although we are not yet ready to provide fiscal 2014 earnings guidance, our portfolio has considerable balance and we have prepared strategies to mitigate the impact of” the nonrenewal, Barrett said.
Walgreen, based in Deerfield, Illinois, is one of the drug distributor’s two largest customers and sales to the drugstore chain generated about 21 percent of the company’s consolidated revenue for fiscal 2012, Cardinal said.
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