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Cardinal Health (CAH) Q3 Earnings Top Estimates, Revenues Lag

Zacks Equity Research logoZacks Equity Research 5/9/2019 Zacks Equity Research

Cardinal Health Inc. CAH delivered third-quarter fiscal 2019 adjusted earnings of $1.59 per share, which surpassed the Zacks Consensus Estimate of $1.43 by 11.2%. Further, the reported figure improved 14.4% year over year.

Revenues increased 4.7% on a year-over-year basis to $35.3 billion but missed the Zacks Consensus Estimate by 0.1%.

Cardinal Health, Inc. Price, Consensus and EPS Surprise


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Cardinal Health, Inc. Price, Consensus and EPS Surprise | Cardinal Health, Inc. Quote

Segmental Analysis

Pharmaceutical Segment

In the fiscal third quarter, pharmaceutical revenues increased 5.5% to $31.36 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 10.1% in profits to $536 million owing to a negative impact from the company's generics program performance. However, better performance at Specialty Solutions partially offset the downside.

Medical Segment

In the quarter under review, revenues at this segment decreased 1.1% to $3.87 billion. The downside can be attributed to the divestitures of the China distribution and naviHealth businesses. However, growth from existing customers mitigated the downside.

Medical segment profits decreased 22.1% to $155 million owing to performance of Cardinal Health Brand products.

Margin Analysis

Gross profit fell 7.8% year over year to $1.76 billion.

As a percentage of revenues, gross margin in the quarter was 5%, down 70 bps on a year-over-year basis.

Distribution, selling, general and administrative expenses totaled $1.09 billion, down 3.1% year over year. Adjusted operating income totaled $667 million, down 14.6% from the year-ago quarter.

Operating margin for Cardinal Health in the quarter under review was 1.2% of net revenues, down 40 bps.

Financial Update

As of Mar 31, 2019, cash and cash equivalents amounted to $3.43 billion, soaring 95% from the 2018-end level.

Cash from operating activities totaled $1.48 billion, up 95.3% from the year-ago quarter.

Dividend Update

The board of directors of Cardinal Health approved a dividend hike of 1% with the raised dividend amounting to 48.11 cents per share or $1.92 on annualized basis. The dividend will be paid on Jul 15, 2019, to shareholders on record as of Jul 1, 2019.     


The company raised the lower end of guidance for fiscal 2019 adjusted earnings per share.

Adjusted earnings from continuing operations are now expected in the range of $5.02-$5.17, up from $4.97-$5.17 projected earlier. The mid-point of the latest guidance range of $5.09 beats the Zacks Consensus Estimate of $5.08.

In Conclusion

Cardinal Health exited the fiscal third quarter on a mixed note, wherein adjusted earnings outpaced the consensus mark, while revenues missed the same. The Pharmaceutical segment registered solid growth in Pharmaceutical Distribution and Specialty Solutions customers. An upbeat guidance is indicative of brighter prospects.

These apart, the company’s extension of its agreements with CVS Health, collaboration with PANTHERx Specialty Pharmacy and buyout of mscripts raise optimism.

Nevertheless, sluggishness in the Medical segment is a concern. Despite growth in business, profits in the Pharmaceutical segment were hurt by generic pharmaceutical pricing. Further, huge investments in Pharmaceutical IT platform and lackluster generics performance are likely to mar Cardinal Health’s operational efficiencies in the upcoming quarters. Intense competition and customer concentration are other bottlenecks. Recently, the company closed the divestiture of Cardinal Health China distribution.

Zacks Rank

Currently, Cardinal Health carries a Zacks Rank #3 (Hold).

Earnings of MedTech Majors at a Glance

Some better-ranked stocks which reported solid results this earning season are Stryker Corporation SYK, DENTSPLY SIRONA Inc. XRAY and CONMED Corporation CNMD, each carrying a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here .

Stryker delivered first-quarter 2019 adjusted earnings per share of $1.88, beating the Zacks Consensus Estimate by 2.2%. Revenues of $3.52 billion were in line with the Zacks Consensus Estimate.

DENTSPLY reported adjusted earnings per share (EPS) of 49 cents in the first quarter of 2019, beating the Zacks Consensus Estimate of 38 cents. Revenues came in at $946.2 million and surpassed the Zacks Consensus Estimate of $917.1 million.

CONMED delivered first-quarter 2019 adjusted earnings per share of 57 cents, which beat the Zacks Consensus Estimate of 54 cents. Revenues were $218.4 million, surpassing the Zacks Consensus Estimate of $213 million.

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