Cardinal Health, Inc.
CEO : Mr. Jason M. Hollar
Quarterly earnings growth(YoY,%)
| Period | Revenue | Operating Income | EPS | Release Date |
|---|---|---|---|---|
| 2023 Q2 | 13.2% YoY | -142.2% | -394.1% | 2023-02-02 |
Trish English says,
Consolidated Results
- Total company revenue increased by 13% and gross margin increased by 3%, driven by the Pharma segment.
- Consolidated SG&A increased by 4%, reflecting inflationary supply chain costs, but was offset by enterprise-wide cost savings initiatives.
- Operating earnings were in line with the second quarter of last year, primarily due to Pharma segment growth and anticipated decline in Medical segment profit.
- Interest and others decreased nearly 30% to $18 million driven primarily by increased interest income from cash and equivalents, resulting in a net benefit from rising interest rates.
- Earnings per share growth was 4% to $1.32.
Segment Performance
- Pharma segment revenue increased 15% to $48 billion, driven by brand and Specialty Pharmaceutical sales growth from existing and net new customers.
- Pharma segment profit increased 9% to $464 million, driven by a higher contribution from Branded Specialty Products and Generics program performance, partially offset by inflationary supply chain costs.
- Medical segment revenue decreased 7% to $3.8 billion, driven by lower products and distribution sales, including PPE pricing and volumes.
- Medical segment profit finished in line with prior commentary, decreasing 66% to $17 million, primarily due to lower products and distribution volumes and net inflationary impact, partially offset by an improvement in PPE margin.
Fiscal 2023 Outlook
- EPS guidance was raised to a new range of $5.20 to $5.50, reflecting improved outlooks for the Pharmaceutical segment and for interest in other.
- Pharma segment revenue outlook was raised to a new range of 13% to 15% growth, and profit outlook to a new range of 4% to 6.5% growth, both primarily reflecting strong first half performance.
- Medical segment revenue decline of 3% to 6% and segment profit ranging from flat to a decline of 20% is still expected.
- Net impact of inflation is still expected to be approximately $300 million in fiscal 2023 or a minimal year-over-year impact.
Share Repurchases and Cash Position
- $1.25 billion has been deployed year-to-date for share repurchases, and $1.5 billion to $2 billion is expected to be deployed in fiscal 2023.
- Adjusted free cash flow was $439 million for Q2 and $781 million year-to-date.
- Cash position was $3.7 billion with no outstanding borrowings on the credit facility, and $550 million of March 2023 notes are expected to be paid down with cash on hand.
Jason Hollar says,
Pharma segment’s performance
- The Q2 results demonstrated ongoing stability and growth in the Pharma segment.
- The overall pharmaceutical demand was strong, and the Generics program performed well.
- The Specialty products showed an increase in contributions, which is a key strategic area of focus for the company.
- The company effectively managed through the inflationary headwinds affecting industry supply chains.
Medical segment’s performance
- The Medical segment’s Q2 results were consistent with the prior commentary, and they showed a return to profitability in the quarter.
- The company remains highly focused on its medical improvement plan initiatives to drive more predictable financial performance.
Enterprise-level benefits
- The company saw benefits below the operating line from its capital deployment actions and favorable capital structure.
Revised outlook
- The company raised its full-year EPS guidance and outlook for the Pharmaceutical segment.
Strategic priorities
- The company is executing on the medical improvement plan, building on the growth and resiliency of the Pharmaceutical segment, and maintaining a relentless focus on maximizing shareholder value.
Q & A sessions,
Medical Improvement Plan Initiatives
- 30% of growth impact mitigated in Q2 from inflation and global supply chain constraints
- Temporary price increases across nearly all Cardinal Health brand product categories to offset higher costs
- 50% inflation mitigation expected by end of fiscal 2023
- Investing in Cardinal Health brand portfolio and expanding sustainable technologies manufacturing facility in Florida
- Investing in growth businesses primarily at-home solutions
Pharma Segment
- Focusing on executing in core and accelerating growth areas, particularly specialty
- Double digit growth from manufacturer services in Q2
- Investing in automation to enhance technology across the supply chain
- Collaborating with Palantir to offer customers a solution that connects diagnostic and clinical data with real-time purchasing and consumption data
- Excited about the work in cell and gene therapy across all service offerings
Relentless Focus on Shareholder Value Creation
- Continuing to place strong emphasis on responsible capital deployment and share repurchases
- Business Review Committee working on comprehensive review of company’s strategy, portfolio, capital allocation framework, and operations
- Investor Day on June 8th to provide update on company’s long-term financial outlook and growth strategies
Factors Affecting Stock Movement
- Continued progress in mitigating inflation and global supply chain constraints
- Optimizing and growing Cardinal Health brand portfolio
- Growth in Pharma segment, particularly specialty
- Investments in automation and technology to enhance supply chain
- ESG and diversity, equity and inclusion initiatives
No bad stock 