Cardinal Health's stock jumps 5% after earnings beat and raised guidance

By Ciara Linnane

Healthcare giant's fiscal fourth-quarter numbers boosted its stock in early trade

Cardinal Health Inc.'s stock rose 5% Wednesday, after the drug distributor and medical products maker beat estimates for its fiscal fourth quarter and raised its guidance.

Dublin, Ohio-based Cardinal Health (CAH) had net income of $235 million, or 96 cents a share, for the quarter, after a loss of $56 million, or 22 cents a share, in the year-earlier period. Adjusted per-share earnings came to $1.84, ahead of the $1.73 FactSet consensus.

Revenue rose to$59.9 billion from $53.4 billion a year ago, also ahead of the $58.7 billion FactSet consensus.

"We enter the new fiscal year with momentum and confidence, evidenced by our raised fiscal year 2025 guidance," Chief Executive Jason Hollar said in prepared remarks.

By segment, revenue at the pharmaceutical and specialty solutions segment rose 13% to $55.6 billion, driven by demand for generics. Revenue at the global medical products and distribution segment rose 2% to $3.1 billion.

Revenue at its other segment, which includes at-home solutions and logistics business Optifreight, rose 15% to $1.2 billion.

The company said it's still committed to executing an improvement plan for the global medical products and distribution segment, which boosted profit to about $240 million in fiscal 2024. But the business is still in the early stage of a turnaround relative to long-term targets for about $300 million in profit, it said.

On a call with analysts, Hollar said the company "has been reviewing GMPD from every angle," and has "uncovered additional opportunities to unlock near-term value through further simplification actions and working capital improvements while continuing to drive the plan," according to a FactSet transcript.

The company is now expecting to buy back up to $750 million of its own shares in fiscal 2025, which is more than its $500 million baseline, he said.

Other highlights from the quarter include managing through the transition of a significant customer, that has the company ready to accelerate growth in key areas, he said.

In April, Cardinal said its drug distribution contracts with UnitedHealth Group Inc.'s OptumRx, a major pharmacy-benefit manager, would not be renewed when they expired at the end of June. Sales to OptumRx accounted for 16% of Cardinal Health's revenue in fiscal year 2023, the company said at the time.

Executives also had positive news on shipping costs, which have been a worry for many big companies that operate globally since the Houthi attacks on cargo ships in the Red Sea, which started last year. The Red Sea is a critical conduit for the Suez Canal, a vital artery in shipping networks.

Chief Financial Officer Aaron Alt told analysts that while costs remained high, they were not at the same level as seen during the pandemic when the supply chain became snarled.

"The costs are higher, but not nearly as high as they used to be," he said. "And most importantly, the supply chain is functioning a lot more efficiently than it was before."

Cardinal ended the year with nearly $4 billion of adjusted free cash flow, and has about $5 billion of cash after returning $1.25 billion to shareholders and funding growth investments.

The company raised its guidance for fiscal 2025 and now expects adjusted EPS of $7.55 to $7.70, versus prior guidance of at least $7.50.

It expects its pharmaceuticals and specialty solutions segment profit to rise 1% to 3%, up from prior guidance of at least 1% growth.

The stock has gained 7% in the year to date, while the S&P 500 has gained 14%.

-Ciara Linnane

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08-14-24 1125ET

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