McKesson 2Q profit falls as tax costs double

McKesson says profit declined 8 percent in fiscal 2Q, but results exceed analyst expectations

• On 6:34 pm EDT, Tuesday October 27, 2009

SAN FRANCISCO (AP) -- Drug distributor McKesson Corp. said Tuesday its profit fell 8 percent in the fiscal second quarter, as greater tax payments and other costs canceled out rising revenue.

For the quarter ended Sept. 30, McKesson said its net income decreased to $301 million, or $1.13 per share, from $327 million, or $1.19 per share, a year ago. Leaving out one-time benefits and costs, profit came to $1.07 per share. Revenue rose 2 percent, to $27.13 billion from $26.57 billion.

The results surpassed Wall Street expectations, however. According to a survey by Thomson Reuters, analysts expected a profit of $1.02 per share and revenue of $26.75 billion.

McKesson's distribution solution revenue rose 2 percent, to $26.34 billion, and technology solutions revenue rose 4 percent to $790 million. But the company said its income tax expense more than doubled to $123 million from $52 million because the prior year included $76 million in tax credits. Interest expenses also increased, to $47 million from $35 million, and its other income dropped to $4 million from $33 million.

The company raised its profit forecast for the fiscal year ending March 31, 2010, and in aftermarket trading, when the earnings were released, McKesson stock advanced 38 cents to $60. In the regular session earlier, shares fell 80 cents to close at $59.62.

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