The provider, drug distributor, and manufacturer indicated that revenue for the fiscal second quarter increased 7% year over year, from $18.5 billion to $19.9 billion, while earnings per share from continuing operations climbed 45.8%, from $0.48 to $0.70. However, that earnings showing is somewhat misleading, in part because of a $105 million restructuring charge Cardinal took in during Q2 2005; factoring out special items and discontinued operations, diluted EPS this quarter actually rose about 16%.
Cardinal owes its earnings growth to solid results in its Pharmaceutical Distribution and Provider Services line and a nice jump in the Clinical Technologies and Services (CTS) business. The distribution side saw its operating earnings grow 16% to $240 million, accounting for nearly half of the quarter's operating earnings. The much smaller CTS side's operating earnings were $94 million, up 34%.
Unfortunately, Cardinal's other units had less to crow about. Medical Products and Services' operating earnings sank 1% to $153 million. However, there may be reason to be optimistic about this unit's future. Cardinal noted that earnings suffered in part because of increased allocation to the unit, but demand remains solid, and international growth is robust.
The prospects for Cardinal's final unit, Pharmaceutical Technologies and Services (PTS), are less hopeful. PTS showed the weakest revenue growth, at 1%, and operating earnings declined 5% to $79 million. Cardinal stressed that progress continues in this unit, but the company has been promising improvement for some time now.
Cardinal is addressing its problems in order to effectively compete with distribution rivals like McKesson
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Fool contributor Brian Gorman is a freelance writer in Chicago. He does not own shares of any companies mentioned in this article.