Cardinal Health (CAH) Beats Q3 Earnings and Revenue Estimates

Cardinal Health, Inc. CAH reported third-quarter fiscal 2020 adjusted earnings of $1.62 per share, which surpassed the Zacks Consensus Estimate of $1.43 by 13.3%. Further, the bottom line rose 1.9% year over year.

Revenues improved 11.2% on a year-over-year basis to $39.16 billion. The top line also beat the Zacks Consensus Estimate by 5.8%.

Segmental Analysis

Pharmaceutical Segment

In the fiscal third quarter, pharmaceutical revenues improved 11.9% to $35.11 billion on a year-over-year basis. The upside can be attributed to sales growth from Pharmaceutical Distribution and Specialty Solutions customers.

Pharmaceutical witnessed a decline of 0.4% in profits to $534 million. An adverse impact of Pharmaceutical Distribution customer contract renewals weighed on the performance.

Cardinal Health Inc Price, Consensus and EPS Surprise

 

Cardinal Health Inc Price, Consensus and EPS Surprise

Cardinal Health Inc price-consensus-eps-surprise-chart | Cardinal Health Inc Quote

Medical Segment

In the quarter under review, revenues at this segment rose 4.6% to $4.05 billion on account of growth in Cardinal Health at Home, and products and distribution.

Medical segment profit improved 14.8% to $178 million driven by increase in products and distribution, which included benefits from cost savings initiatives and global manufacturing.

Margin Analysis

Gross profit improved 6.9% year over year to $1.89 billion.

As a percentage of revenues, gross margin in the reported quarter was 4.8%, down 20 basis points (bps) on a year-over-year basis.

Distribution, selling, general and administrative expenses totaled $1.17 billion, up 6.2% year over year.

The company reported operating income of $562 million in the quarter under review, up 30.1% from the year-ago quarter. As a percentage of revenues, operating margin in the reported quarter was 1.4%, up 20 bps on a year-over-year basis.

Financial Update

The company exited the quarter with cash and cash equivalents of $2.33 billion, up 7.9% sequentially.

Cumulative cash from operating activities totaled $1.68 billion at end of the fiscal third quarter, compared with $1.48 billion in the year-ago quarter.

2020 Guidance Reiterated

The company has reaffirmed fiscal 2020 adjusted earnings per share, which ranges between $5.20 and $5.40. The Zacks Consensus Estimate is pegged at $5.19 per share.

Conclusion

Cardinal Health exited the fiscal third quarter on a strong note, wherein both earnings and revenues outpaced the consensus mark. The Pharmaceutical segment witnessed solid growth in Pharmaceutical Distribution and Specialty Solutions customers. Moreover, the Medical segment exhibited a solid performance in the quarter under review. Apart from these, the company’s extension of agreements with CVS Health, collaboration with PANTHERx Specialty Pharmacy and buyout of mscripts buoy optimism. The company reaffirmed fiscal year 2020 outlook, which instills investor optimism in the stock.

However, contraction in gross margin remains a woe. Intense competition and customer concentration are other concerns.

Zacks Rank

Currently, Cardinal Health carries a Zacks Rank #2 (Buy).

Other Key Picks

Some other top-ranked stocks in the broader medical space are Aphria Inc. APHA, Biogen Inc. BIIB and Eli Lilly and Company LLY.

Aphria reported third-quarter fiscal 2020 adjusted EPS of 2 cents, beating the Zacks Consensus Estimate of a loss of 4 cents. Net revenues of $64.4 million surpassed the consensus mark by 14.6%. The company carries a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Biogen currently carries a Zacks Rank #2. It reported first-quarter 2020 adjusted EPS of $9.14, surpassing the Zacks Consensus Estimate by 18.1%. Revenues of $3.53 billion outpaced the consensus mark by 3.2%.

Eli Lilly reported first-quarter 2020 EPS of $1.75, outpacing the Zacks Consensus Estimate by 12.9%. Revenues of $145.3 million surpassed the consensus mark by 6.3%. The company currently sports a Zacks Rank #1.

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