May 4, 2009 / 10:40 PM / in 8 years

UPDATE 3-McKesson profit falls, outlook disappoints

* Fiscal Q4 net earnings $1.01

* Sees EPS $3.90 to $4.05 for fiscal 2010

* Shares fall 3.5 pct (Adds company comment from conference call, analyst comment)

By Bill Berkrot

NEW YORK, May 4 (Reuters) - McKesson Corp (MCK.N) reported on Monday that its quarterly profit fell 8.4 percent and the pharmaceutical wholesaler forecast earnings for fiscal 2010 below Wall Street estimates, sending its share down by more than 3 percent.

Citing slow economic conditions and customer purchasing delays, McKesson now sees earnings of $3.90 to $4.05 for the fiscal year ending March 31, 2010. Analysts on average had been anticipating $4.12 per share for the period.

"The guidance, I think that might disappoint some people," said Richard Close, an analyst with Jefferies & Co.

"They had been foreshadowing some headwinds in both their businesses."

McKesson officials said its forecast assumes that the economy and financial markets stay about the same as they are now for most of fiscal 2010, which ends March 31, with a modest uptick toward the end of the year.

The company expects the fourth quarter to be the strongest with "a modest sequential build" over the first three quarters.

"The company had been providing some signal that fiscal 2010 was going to be a tougher year than they had envisioned or hoped for even a few months ago," said Eric Coldwell, an analyst for Robert W Baird & Co who had already lowered his 2010 earnings forecast to $3.98.

"It's not really a growth year in either division," Coldwell added. "They're fighting to be up a little. Compared to many industries that isn't bad."

The San Francisco-based company said net profit fell to $281 million, or $1.01 per share, for its fiscal fourth quarter, from a profit of $307 million, or $1.05 per share, a year ago.

The results included a 22-cents-per-share charge related to an equity investment.

Revenue for the quarter was flat at $26.2 billion, shy of Wall Street estimates of $27.32 billion. But with aggressive cost controls the company said it kept operating expenses flat for the quarter as well.

Close said he was "a little surprised" by the flat revenue for the quarter.

"As the quarter materialized, they began to see some pressures on their businesses," he said.

Revenue for the quarter for both the pharmaceutical distribution business and technology solutions unit was flat.

Chief Executive John Hammergren said the company expects the pressures it saw on its business in the quarter to continue into 2010.

But he said he sees "modest revenue growth" in pharmaceutical distribution going forward, helped by generic drugs, which have a higher profit margin than more expensive branded medicines.

With the recent flu outbreak, Hammergren said the company was working to secure flu related products and move them quickly through its distribution networks to where they are needed.

McKesson shares fell to $37.75 in extended trading from their New York Stock Exchange close at $39.11 (Reporting by Bill Berkrot; Editing by Andre Grenon and Gunna Dickson)

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