Business

SAN FRANCISCO (AP) ― McKesson Corp.'s fiscal second-quarter profit breezed by analysts' estimates, building on recent momentum that has turned the largest U.S. distributor of pharmaceutical drugs into a more attractive takeover target.

The San Francisco-based company said Tuesday that it earned $247 million, or 83 cents per share, during the three months ended in September. That represented an 8 percent increase from net income of $229 million, or 75 cents per share, at the same time last year.

Revenue rose 9 percent to $24.45 billion, up from $22.39 billion a year ago.

If not for a small gain from a fund set up to cover the company's past legal problems, McKesson said it would have made 82 cents per share. That was well above the average estimate of 72 cents per share among analysts surveyed by Thomson Financial.

It marked the sixth consecutive quarter in which McKesson has topped analysts' earnings forecast.

Management raised the bar for the remainder of its fiscal year ending in March, projecting earnings of $3.22 to $3.37 per share, up from the previous guidance of $3.15 to $3.30 per share. The average estimate among analysts had been $3.25 per share.

Through the first half of the fiscal year, McKesson earned $482 million, of $1.60 per share, on revenue of $49 billion. At the same juncture last year, McKesson earned $413 million, or $1.35 per share, on revenue of $45.7 billion.

"We are well positioned as we finish this year and look forward to continued strong performance," McKesson Chairman John Hammergren told analysts during a Tuesday conference call.

McKesson's succession of pleasant earnings surprises has helped lift its stock by nearly 20 percent so far this year. The shares gained 56 cents to finish at $58.55 Tuesday, then added $1.65, or 2.8 percent, in after-hours trading.

Some analysts still view McKesson's stock as relative bargain, given the company's steady earnings growth and the fact that the drug distribution industry traditionally chugs along even when the overall economy bogs down.

What's more, McKesson's balance sheet is good shape. The company ended September with $2.5 billion in available cash and just $1.8 billion in long-term debt.

Those factors have stirred talk on Wall Street that buyout firms may be interested in acquiring McKesson if the recent credit crunch eases enough to free up adequate financing. At the end of Tuesday's regular trading, McKesson had a market value of about $17 billion.

McKesson's current allure is a change from a few years ago when the company was still struggling to recover from an accounting scandal that wiped out half its market value in 1999 under a different management team.

Although the company has been on an upswing during the past three years, its stock still hasn't fully recovered from the 1999 fiasco.

Besides engineering a financial comeback, Hammergren has been trying to boost the stock by buying back McKesson shares and expanding through acquisitions.

In the first half of its fiscal year, McKesson bought back $684 million worth of its stock and has been authorized to spend another $1.32 billion buying back shares.

A $1.1 billion acquisition of health-care administrator Per-Se Technologies Inc. completed earlier this year began to pay dividends in the second quarter by contributing to a 36 percent revenue increase in McKesson's technology division.

McKesson is hoping to capitalize on the rising demand for cancer medicine through a just-completed $575 million acquisition of Oncology Therapeutics Network.

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