Cardinal Health Surpasses Q1 Expectations, Raises Fiscal 2025 Outlook
Cardinal Health Inc. (CAH) kicked off fiscal year 2025 with impressive results, exceeding both earnings and revenue expectations. The company reported adjusted earnings per share (EPS) of $1.88 for the first quarter, a 9% year-over-year increase, surpassing the consensus estimate of $1.62. Revenue also came in above expectations, reaching $52.28 billion, a 4% decline from the previous year but surpassing the consensus estimate of $50.90 billion.
Pharmaceutical and Specialty Solutions Segment Drives Growth
The key driver of Cardinal Health’s strong performance was its Pharmaceutical and Specialty Solutions segment. This segment, which distributes branded and generic pharmaceuticals, specialty drugs, and OTC products, saw a 5% decline in revenue to $48.0 billion. However, excluding the impact of a customer contract expiration, revenue actually increased by 16%. This growth was fueled by strong sales of brand and specialty pharmaceuticals from existing customers. The segment also saw a 16% increase in profit to $530 million, driven by higher contributions from brand and specialty products, including the early seasonal launch of COVID-19 vaccine distribution and a successful generics program.
Global Medical Products and Distribution Segment Faces Challenges
Cardinal Health’s Global Medical Products and Distribution (GMPD) segment, which manufactures, sources, and distributes medical, surgical, and laboratory products, saw a more mixed performance. Revenue increased 3% to $3.1 billion, driven by volume growth from existing customers. However, profit in this segment declined to $8 million, primarily due to higher manufacturing, health, and welfare costs. These increases were partially offset by improved net inflationary impacts, mitigation initiatives, and growth from existing customers.
Strong Performance Leads to Upward Revision of Outlook
The strong performance in the first quarter has emboldened Cardinal Health to revise its fiscal year 2025 outlook upward. The company now expects adjusted EPS to be in the range of $7.75 to $7.90, up from the previous guidance of $7.55 to $7.70. This revised outlook surpasses the consensus estimate of $7.63.
This upward revision is driven by a more optimistic outlook for the Pharmaceutical and Specialty Solutions segment. The company has raised its profit outlook for this segment to 4% to 6% growth, up from the previous guidance of 1% to 3% growth. However, the company has also adjusted its profit outlook for the GMPD segment downward to $140 million to $175 million, from approximately $175 million, primarily due to the impact of higher health and welfare costs.
Positive Market Reaction
Investors reacted positively to Cardinal Health’s strong first-quarter performance and revised outlook. CAH stock was trading 2.97% higher at $111.74 during the premarket session on Friday.
