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Cardinal Health (CAH) Misses on Q3 Earnings, Lowers '18 View
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Cardinal Health Inc. (CAH - Free Report) reported third-quarter fiscal 2018 adjusted earnings of $1.39 per share, which missed the Zacks Consensus Estimate of $1.51. Adjusted earnings fell 9% year over year.
Revenues increased 6% on a year-over-year basis to almost $33.63 billion and edged past the Zacks Consensus Estimate of $33.60 billion.
Cardinal Health has a Zacks Rank #3 (Hold). In the last six months, shares of Cardinal Health have outperformed its industry. The stock has returned 7.3%, above the industry’s rise of 6.3%.
Segmental Analysis
Pharmaceutical Segment
Pharmaceutical revenues increased 5% to $29.72 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, the segment witnessed expiration of a large, mail-order customer contract along with the divestiture of the company's China distribution business.
Pharmaceutical witnessed a 3% decline in profits to $596 million, thanks to generic pharmaceutical pricing.
Medical Segment
Revenues in the segment improved 15% to $3.92 billion, primarily on higher contributions from new and existing customers along with the acquisition of the Patient Recovery business.
Medical segment profits increased 34% to $199 million.
Cardinal Health, Inc. Price, Consensus and EPS Surprise
Gross Profit increased 10.7% year over year to $1.91 billion.
As a percentage of revenues, gross margin expanded 30 basis points (bps) to 5.7% of net revenues.
Guidance
The company slashed guidance for fiscal 2018 adjusted earnings per share to $4.85-$4.95. The current range is significantly lower than the previous estimate of $5.25-$5.50. The downside was caused by the company's effective tax rate associated with the Cordis business. The Zacks Consensus Estimate for 2018 revenues is pegged at $136.11 billion.
Our Take
Cardinal Health exited the quarter on a tepid note with adjusted earnings missing the consensus mark. The company witnessed encouraging performance in the Medical segment. The Pharmaceutical segment registered strong growth in the Specialty business and gained a large number of Pharmaceutical Distribution customers. Further, the company is banking on strategic buyouts, joint ventures and supply agreements to drive growth.
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 its Cardinal Health China distribution.
Q1 Earnings of MedTech Majors at a Glance
A few better-ranked stocks in the broader medical space, which reported solid earnings this season are Baxter International Inc. (BAX - Free Report) , Varian Medical Systems, Inc. and Intuitive Surgical, Inc. (ISRG - Free Report) .
Intuitive Surgical reported adjusted earnings of $2.44 per share, which surpassed the Zacks Consensus Estimate by 22.6%. Revenues totaled $848 million, which beat the Zacks Consensus Estimate by 10.6%.
Varian reported second-quarter fiscal 2018 adjusted earnings of $1.15 per share, which beat the Zacks Consensus Estimate of $1.06. Adjusted earnings improved 27.8% on a year-over-year basis.
Baxter reported first-quarter 2018 adjusted earnings per share of 70 cents, which beat the Zacks Consensus Estimate by 12.9% and improved from the year-ago quarter’s figure of 58 cents.
5 Medical Stocks to Buy Now
Zacks names 5 companies poised to ride a medical breakthrough that is targeting cures for leukemia, AIDS, muscular dystrophy, hemophilia, and other conditions.
New products in this field are already generating substantial revenue and even more wondrous treatments are in the pipeline. Early investors could realize exceptional profits.
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Cardinal Health (CAH) Misses on Q3 Earnings, Lowers '18 View
Cardinal Health Inc. (CAH - Free Report) reported third-quarter fiscal 2018 adjusted earnings of $1.39 per share, which missed the Zacks Consensus Estimate of $1.51. Adjusted earnings fell 9% year over year.
Revenues increased 6% on a year-over-year basis to almost $33.63 billion and edged past the Zacks Consensus Estimate of $33.60 billion.
Cardinal Health has a Zacks Rank #3 (Hold). In the last six months, shares of Cardinal Health have outperformed its industry. The stock has returned 7.3%, above the industry’s rise of 6.3%.
Segmental Analysis
Pharmaceutical Segment
Pharmaceutical revenues increased 5% to $29.72 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, the segment witnessed expiration of a large, mail-order customer contract along with the divestiture of the company's China distribution business.
Pharmaceutical witnessed a 3% decline in profits to $596 million, thanks to generic pharmaceutical pricing.
Medical Segment
Revenues in the segment improved 15% to $3.92 billion, primarily on higher contributions from new and existing customers along with the acquisition of the Patient Recovery business.
Medical segment profits increased 34% to $199 million.
Cardinal Health, Inc. Price, Consensus and EPS Surprise
Cardinal Health, Inc. Price, Consensus and EPS Surprise | Cardinal Health, Inc. Quote
Margin Analysis
Gross Profit increased 10.7% year over year to $1.91 billion.
As a percentage of revenues, gross margin expanded 30 basis points (bps) to 5.7% of net revenues.
Guidance
The company slashed guidance for fiscal 2018 adjusted earnings per share to $4.85-$4.95. The current range is significantly lower than the previous estimate of $5.25-$5.50. The downside was caused by the company's effective tax rate associated with the Cordis business. The Zacks Consensus Estimate for 2018 revenues is pegged at $136.11 billion.
Our Take
Cardinal Health exited the quarter on a tepid note with adjusted earnings missing the consensus mark. The company witnessed encouraging performance in the Medical segment. The Pharmaceutical segment registered strong growth in the Specialty business and gained a large number of Pharmaceutical Distribution customers. Further, the company is banking on strategic buyouts, joint ventures and supply agreements to drive growth.
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 its Cardinal Health China distribution.
Q1 Earnings of MedTech Majors at a Glance
A few better-ranked stocks in the broader medical space, which reported solid earnings this season are Baxter International Inc. (BAX - Free Report) , Varian Medical Systems, Inc. and Intuitive Surgical, Inc. (ISRG - Free Report) .
While Intuitive Surgical and Varian sport a Zacks Rank #1 (Strong Buy), Baxter carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Intuitive Surgical reported adjusted earnings of $2.44 per share, which surpassed the Zacks Consensus Estimate by 22.6%. Revenues totaled $848 million, which beat the Zacks Consensus Estimate by 10.6%.
Varian reported second-quarter fiscal 2018 adjusted earnings of $1.15 per share, which beat the Zacks Consensus Estimate of $1.06. Adjusted earnings improved 27.8% on a year-over-year basis.
Baxter reported first-quarter 2018 adjusted earnings per share of 70 cents, which beat the Zacks Consensus Estimate by 12.9% and improved from the year-ago quarter’s figure of 58 cents.
5 Medical Stocks to Buy Now
Zacks names 5 companies poised to ride a medical breakthrough that is targeting cures for leukemia, AIDS, muscular dystrophy, hemophilia, and other conditions.
New products in this field are already generating substantial revenue and even more wondrous treatments are in the pipeline. Early investors could realize exceptional profits.
Click here to see the 5 stocks >>