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Cardinal Health (CAH) Q2 Earnings & Revenues Top Estimates

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Zacks Equity Research
·5 min read
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Cardinal Health, Inc. CAH reported second-quarter fiscal 2021 adjusted earnings of $1.74 per share (EPS), which surpassed the Zacks Consensus Estimate of $1.45 by 20%. The bottom line also improved 14.5% year over year.

Revenue Details

Revenues increased 4.5% on a year-over-year basis to $41.54 billion. The top line beat the Zacks Consensus Estimate by 0.01%.

Segmental Analysis

Pharmaceutical Segment

In the fiscal second quarter, pharmaceutical revenues rose 4.3% to $37.24 billion on a year-over-year basis. The upside can be attributed to growth in sales from Pharmaceutical Distribution and Specialty Solutions customers.

Cardinal Health, Inc. Price, Consensus and EPS Surprise

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

Pharmaceutical witnessed a decline of 10.6% in profits to $413 million due to decline in volume on account of the COVID-19 impact, particularly in the generics program and Nuclear and Precision Health Solutions business. However, increase in contribution from brand sales mix partially offset the downside.

Medical Segment

In the quarter under review, revenues at this segment increased 7.1% to $4.31 billion attributable to higher sales from personal protective equipment (PPE) and increase in volumes in its lab business. However, adverse impact of cancelled or deferred elective procedures partially offset the upside.

Medical segment profit improved 21% to $236 million, courtesy of net positive impact from COVID-19 and benefits from cost savings that include global manufacturing efficiencies.

Margin Analysis

Gross profit rose 3.6% year over year to $1.78 billion.

As a percentage of revenues, gross margin in the reported quarter was 4.3%, remaining flat on a year-over-year basis.

Distribution, selling, general and administrative expenses totaled $1.15 billion, down 1.4% year over year.

The company reported operating income of $461 million in the quarter under review, up 38% from the prior-year quarter. As a percentage of revenues, operating margin in the reported quarter was 1.1%, up 30 basis points (bps) from the year-ago quarter.

Financial Update

The company exited the quarter with cash and cash equivalents of $3.74 billion, compared with $2.75 billion on a sequential basis.

Net cash from operating activities totaled $1.22 billion at end of the fiscal second quarter, compared with $697 million in the year-ago quarter.

2021 Guidance Raised

The company anticipates adjusted earnings per share between $5.85 and $6.10 (up from the previously guided range of $5.65-$5.95). The Zacks Consensus Estimate is pegged at $5.82 per share.

Conclusion

Cardinal Health exited the fiscal second quarter on a strong note, wherein both earnings and revenues outpaced the consensus mark. The company witnessed revenue growth in both its segments in the quarter under review. Raised fiscal 2021 outlook is a positive.

Notably, the company inked a deal with the Centers for Disease Control and Prevention (CDC) to become a network administrator in Phase 2 of the Federal Pharmacy Partnership Strategy for COVID-19. Further, the Ohio Department of Health chose the Cardinal Health OptiFreight Logistics business to help in the distribution efforts of COVID-19 vaccines. These developments fuel optimism in the stock.

However, intense competition and customer concentration are other concerns. The company witnessed a decline in profit with respect to Pharmaceutical segment in the quarter under review due to COVID-19 induced volume declines.

Zacks Rank

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

Earnings of Other MedTech Majors at a Glance

Some better-ranked stocks in the broader medical space that have already announced their quarterly results are Hologic, Inc. HOLX, Abbott Laboratories ABT and AngioDynamics, Inc. ANGO. While Hologic sports a Zacks Rank of 1 (Strong Buy), both Abbott and AngioDynamics carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Hologic reported first-quarter fiscal 2021 adjusted EPS of $2.86, which surpassed the Zacks Consensus Estimate by 33.6%.

Abbott reported fourth-quarter 2020 adjusted EPS of $1.45, which surpassed the Zacks Consensus Estimate by 6.6%. Fourth-quarter worldwide sales of $10.7 billion outpaced the consensus mark by 7.9%.

AngioDynamics reported second-quarter fiscal 2021 adjusted EPS of a penny against the Zacks Consensus Estimate of a loss per share of 2 cents. Revenues of $72.8 million beat the consensus mark by 8%.

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