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Cardinal Health (CAH) Q2 Earnings and Revenues Top Estimates

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Cardinal Health, Inc. (CAH - Free Report) reported second-quarter fiscal 2022 adjusted earnings of $1.27 per share (EPS), which beat the Zacks Consensus Estimate of $1.23 by 3.3%. However, the bottom line declined 27% year over year.

GAAP EPS in the quarter was 17 cents, compared with the year-ago quarter’s figure of $2.13 per share.

Revenue Details

Revenues improved 9% on a year-over-year basis to $45.46 billion. The top line outpaced the Zacks Consensus Estimate by 1%.

Segmental Analysis

Pharmaceutical Segment

In the fiscal second quarter, pharmaceutical revenues amounted to $41.38 billion, up 11% on a year-over-year basis. The performance highlights branded pharmaceutical sales growth from Pharmaceutical Distribution and Specialty Solutions customers.

Pharmaceutical profit was $426 million, up 3% on a year-over-year basis.The upside was driven by generics program performance. This improvement was largely offset by investments in technology enhancements and an increase in operations expenditure.

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 fell 5% to $4.09 billion due to the divestiture of the Cordis business.

The company reported a profit of $50 million in the Medical segment, which plunged 79% from the year-ago quarter primarily due to inflationary impacts and global supply chain restrictions in products and distribution. The deterioration highlights the timing of selling higher-cost personal protective equipment (PPE), including the net positive impact in the prior year, and to a smaller extent, the divestiture of the Cordis business.

Margin Analysis

Gross profit fell 9% year over year to $1.62 billion.

As a percentage of revenues, gross margin in the reported quarter was 3.6%, down 70 basis points (bps) on a year-over-year basis.
Distribution, selling, general and administrative expenses totaled $1.15 billion, up 0.3% year over year.

The company reported an operating loss of $950 million in the quarter under review, against the year-ago quarter’s income of $461 million.

Financial Update

The company exited the quarter with cash and cash equivalents of $3.16 billion, compared with $2.46 billion on a sequential basis.

Cumulative net cash used in operating activities totaled $549 million at the end of the fiscal second quarter, compared with net cash provided of $1.49 billion in the year-ago quarter.

2022 Guidance Revised

Cardinal Health updated its fiscal 2022 outlook. The company anticipates adjusted earnings per share between $5.15 and $5.50 (down from $5.60 and $5.90). The Zacks Consensus Estimate is pegged at $5.33 per share.

The outlook represents previously announced the additional impact of $150-$175 million from higher inflation and global supply chain constraints and a lower-than-expected offset from pricing actions.

Conclusion

Cardinal Health exited the fiscal second quarter on a strong note, wherein both earnings and revenues beat the consensus mark. The company witnessed revenue growth in its Pharmaceutical in the quarter under review.

Per management, sustained growth in the Pharma segment, solid cash flow generation and capital deployment and progress toward its $750 million enterprise cost savings goal buoy optimism.

However, intense competition and customer concentration are other concerns. Weakness in the Medical segment is a woe. Contraction in gross margin remains a headwind.

Zacks Rank

Currently, Cardinal Health carries a Zacks Rank #5 (Strong Sell).

Key Picks

Some better-ranked stocks that are supposed to report earnings soon are Cerner Corporation , Baxter International Inc. (BAX - Free Report) and AMN Healthcare Services, Inc. (AMN - Free Report) .

The Zacks Consensus Estimate for Cerner’s fourth-quarter 2021 adjusted EPS is currently pegged at 88 cents. The consensus estimate for fourth-quarter 2021 revenues stands at $1.49 billion. The company currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Cerner has an estimated long-term growth rate of 12.8%. CERN’s earnings yield of 4% compares favorably with the industry’s negative yield.

Baxter currently has a Zacks Rank #2. The Zacks Consensus Estimate for its fourth-quarter 2021 adjusted EPS is currently pegged at $1.03. The consensus mark for fourth-quarter revenues stands at $3.35 billion.

Baxter has an estimated long-term growth rate of 9.5%. BAX’s earnings yield of 4.9% compares favorably with the industry’s negative yield.

AMN Healthcare currently carries a Zacks Rank #2. The Zacks Consensus Estimate for its fourth-quarter 2021 adjusted EPS currently stands at $2.58. The consensus estimate for its revenues stands at $1.28 billion.

AMN Healthcare has an estimated long-term growth rate of 16.2%. AMN’s earnings yield of 6.7% compares favorably with the industry’s 1.1%.


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