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Cardinal Health (CAH) Q1 Earnings Beat Estimates, Fall Y/Y

Zacks Equity Research

Cardinal Health Inc. CAH reported first-quarter fiscal 2017 adjusted earnings of $1.24 per share, which beat the Zacks Consensus Estimate of $1.21 but decreased 10% on a year-over-year basis.

The earnings beat was driven by 14% growth in revenues, which totaled $32.0 billion and surpassed the Zacks Consensus Estimate of $31.2 billion. The revenue growth was on account of strong performance by both the Pharmaceutical and Medical segments.

Quarter Details

Pharmaceutical revenues increased 14% to $28.8 billion owing to strong growth from existing and net new distribution customers. Strong performance from the Specialty business also drove results.

Medical segment revenues increased 12% to $3.3 billion. Higher contributions from acquisitions and net new and existing customers were primarily behind the growth in Medical segment revenues.

Distribution, selling, general and administrative (SG&A) expenses increased 9% on a year-over-year basis to $920 million in the reported quarter.

Pharmaceutical segment profit in the quarter decreased 19% to $534 million due to generic pharmaceutical pricing and reduced levels of branded inflation. This was partially offset by solid performance by Red Oak Sourcing.

Medical segment profit soared 26% to $127 million on the back of strong contribution from acquisitions and the Cardinal Health Brand products.

In the reported quarter, net income declined 19% to $309 million from last fiscal year's $383 million. Adjusted net income was $399 million compared with $458 million in the year-ago period.


CARDINAL HEALTH Price, Consensus and EPS Surprise


CARDINAL HEALTH Price, Consensus and EPS Surprise | CARDINAL HEALTH Quote


Based on fiscal first-quarter results and second-quarter expectations, the company lowered its fiscal 2017 guidance range for adjusted earnings per share from continuing operations to $5.40 to $5.60 from $5.48 to $5.73. The outlook represents growth of approximately 3% to 7% from the prior fiscal year.

Full-fiscal Pharmaceutical segment profit is now expected to be lower than fiscal 2016. The downside would come from generic pharmaceutical pricing and, to a lesser extent, from reduced levels of branded inflation.

Zacks Rank & Stocks to Consider

Currently, Cardinal Health carries a Zacks Rank #4 (Sell).

Better-ranked stocks in the broader medical sector are Intuitive Surgical Inc. ISRG, AngioDynamics Inc. ANGO and Glaukos Corporation GKOS. Notably, AngioDynamics and Intuitive Surgical carry a Zacks Rank #2 (Buy) while Glaukos sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Intuitive Surgical has a long-term expected earnings growth rate of approximately 11.35%. The stock represents an impressive one-year return of approximately 32.2%.

AngioDynamics has a long-term expected earnings growth rate of 15.00%. The company posted a solid one-year return of almost 21.8%.

Glaukos Corporation recorded a stellar one-year return of almost 66.09%. Notably, the company posted positive surprises in the past four quarters, the average being 110.93%.

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