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Cardinal Health (CAH) Surpasses Earnings Estimates in Q1

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Cardinal Health Inc. (CAH - Free Report) delivered first-quarter fiscal 2019 adjusted earnings of $1.29 per share, which beat the Zacks Consensus Estimate of $1.06. Adjusted earnings increased 18% year over year.

Revenues increased 7.9% on a year-over-year basis to $35.21 billion and beat the Zacks Consensus Estimate of $33.54 billion.

Cardinal Health currently has a Zacks Rank #4 (Sell).

Segmental Analysis

Pharmaceutical Segment

In the fiscal first quarter, pharmaceutical revenues increased 8.6% to $31.42 billion on a year-over-year basis. The segment witnessed strong growth in the Specialty business and gained a large number of Pharmaceutical Distribution customers.

However, strong growth in the segment was partially offset by the divestiture of the company's China distribution business.

Pharmaceutical witnessed a 12.8% decline in profits to $409 million, thanks to generic pharmaceutical pricing.

Medical Segment

In the quarter under review, revenues in the segment improved 2.1% to $3.80 billion, courtesy of the Patient Recovery business acquisition.

Medical segment profits increased 4.7% to $135 million.

Cardinal Health, Inc. Price, Consensus and EPS Surprise

 

Margin Analysis

Gross Profit inched down 0.3% year over year to $1.67 billion.

As a percentage of revenues, gross margin in the quarter was 4.7%, down 40 basis points (bps) on a year-over-year basis.

Distribution, selling, general and administrative expenses were $1.16 billion in the quarter under review, up 8.8% year over year. Adjusted operating margin for Cardinal Health in the quarter under review was 3.3% of net revenues, flat year over year.

Guidance

The company reiterated guidance for fiscal 2019 adjusted earnings per share.

Adjusted earnings from continuing operations are expected in the range of $4.90-$5.15. The Zacks Consensus Estimate was pegged at $5.02, which lies within the guidance.

In Conclusion

Cardinal Health exited the fiscal first quarter on a solid note, with adjusted earnings and revenues beating the consensus mark. The Pharmaceutical segment registered strong growth in the Specialty business and gained a number of Pharmaceutical Distribution customers. Cardinal Health also inked a partnership with Clayton, Dubilier & Rice to accelerate growth of naviHealth, a market leader in post-acute care management.

Despite growth in business, profits in the Pharmaceutical segment were hurt by generic pharmaceutical pricing. 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.

Earnings of Other MedTech Majors at a Glance

A few better-ranked stocks in the broader medical space which also reported solid earnings this season are Intuitive Surgical (ISRG - Free Report) , Stryker Corporation (SYK - Free Report) and Merit Medical Systems, Inc. (MMSI - Free Report) . Each of the stocks carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Intuitive Surgical reported third-quarter 2018 adjusted EPS of $2.83, which beat the Zacks Consensus Estimate of $2.65. Revenues totaled $920.9 million, also surpassing the consensus estimate of $918.6 million.

Stryker posted third-quarter 2018 adjusted EPS of $1.69, beating the Zacks Consensus Estimate by a penny. Operating margin was 17.8%, up 30 basis points (bps).

Merit Medical reported third-quarter 2018 adjusted EPS of 47 cents, which trumped the Zacks Consensus Estimate of 42 cents. Revenues of $221.6 million edged past the consensus estimate of $218 million.

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