Cardinal Health Q1 Earnings Call Highlights

Key Points

• Cardinal Health raised its fiscal 2027 adjusted EPS forecast to $12.80–$13.00 from $12.40–$12.60 after first-quarter EPS grew 28% to $3.26; revenue rose 5% to $67.5 billion.
• Pharmaceutical and specialty segment profit increased 17%, with specialty revenue up 18%; the company lifted its full-year pharmaceutical profit growth outlook to 10%–12%. Its “other” businesses also beat expectations, prompting higher revenue and profit growth forecasts.
• The CVS Health contract renewal through June 2032 adds customer visibility, while elevated petroleum costs are pushing the medical segment’s profit outlook toward the low end of its $200 million–$220 million range.

Cardinal Health NYSE: CAH raised its fiscal 2027 earnings outlook after reporting double-digit profit growth in its pharmaceutical and specialty segment and its other growth businesses for the first quarter.

The healthcare distributor now expects non-GAAP diluted earnings per share of $12.80 to $13.00 for the year, up from its previous forecast of $12.40 to $12.60. Chief Financial Officer Aaron Alt said the increase reflected operating momentum across the company and confidence in continued profit growth.

First-quarter revenue rose 5% to $67.5 billion, while operating income increased 17% to $1 billion, reaching that level in a quarter for the first time, Alt said. Diluted earnings per share grew 28% to $3.26. Figures discussed on the call were non-GAAP unless otherwise specified.

Pharmaceutical Demand Drives Growth

Revenue in the pharmaceutical and specialty solutions segment increased 6% to $62.6 billion, and segment profit rose 17% to $783 million. Alt attributed the performance to contributions from brand-name drugs, specialty products and the company’s generics program, as well as its Solaris acquisition.

Specialty revenue grew 18%, supported by areas including urology and oncology. Alt said generic volumes were slightly above the company’s long-term targets, while market dynamics remained consistent.

GLP-1 medications contributed approximately 5 percentage points to segment revenue growth, Alt said. That was largely offset by a 4-percentage-point headwind from reductions in wholesale acquisition costs under the Inflation Reduction Act.

Cardinal Health raised its full-year pharmaceutical segment profit growth forecast to 10% to 12%, from 8% to 11%, while maintaining its revenue growth outlook of 3% to 5%. Alt said the company expects segment earnings growth to moderate in the second and third quarters before strengthening in the fourth, partly because of the timing of customer renewals and comparisons with the Solaris acquisition.

CVS Renewal Adds Visibility

Chief Executive Officer Jason Hollar highlighted the recently announced renewal of Cardinal Health’s agreement with its largest customer, CVS Health, through June 2032. Alt said the company’s original fiscal 2027 profit guidance had largely anticipated the financial impact of the renewal.

Hollar said Cardinal Health has renewed contracts representing nearly two-thirds of enterprise revenue over the past 12 months, including agreements with its two largest pharmaceutical customers and its two largest global medical products and distribution customers.

Asked about Red Oak Sourcing, Cardinal Health’s generics joint venture with CVS, Hollar said it is governed by a separate contract that the company expects to address relatively soon. He said Cardinal Health anticipates the relationship continuing beyond 2029, but added that work remains to complete that step.

Medical Unit Faces Cost Pressure

Revenue in global medical products and distribution was roughly flat at $3.2 billion, as growth in Cardinal Health-branded products was offset by lower distribution revenue. Segment profit was $33 million, which Alt said was higher than expected.

The company maintained its full-year segment profit forecast of $200 million to $220 million, but Alt said sustained high petroleum costs driven by the ongoing Iran conflict were pushing expectations toward the low end of that range. He said the company expects results to be weighted toward the second half of the fiscal year.

In the reporting category called “other,” which includes at-Home Solutions, Nuclear & Precision Health Solutions and OptiFreight Logistics, revenue rose 7% to $1.8 billion and profit increased 16% to $193 million. All three businesses delivered revenue and profit growth.

Cardinal Health raised its annual revenue growth forecast for the category to 12% to 14%, from 11% to 13%, and its profit growth forecast to 17% to 20%, from 15% to 18%. Alt said the outlook reflects strong demand and greater confidence in the business pipeline.

Cash Flow and Policy Outlook

Cardinal Health generated $1.6 billion in adjusted free cash flow during the quarter and ended the period with $5.3 billion in cash. It completed a $500 million accelerated share repurchase and paid approximately $125 million in dividends. The company maintained its full-year adjusted free cash flow forecast of $3.5 billion to $4 billion.

On potential policy changes, Hollar said Cardinal Health would continue engaging with policymakers. Asked about reimbursement changes affecting the 340B drug-pricing program, he said some patient volume could move between care settings, but that it was premature to predict how much. Cardinal Health would expect to participate in any shift consistent with its market presence, he said.

Hollar also said future acquisition opportunities would likely remain aligned with the company’s existing strategy, including specialty, biopharma services and at-home care. He emphasized that integration capability would constrain the pace of further consolidation in areas such as physician services.

About Cardinal Health (NYSE:CAH)

Cardinal Health is a healthcare services and products company that distributes pharmaceuticals and medical supplies. Its customers include pharmacies, hospitals, surgery centers, physician offices and other healthcare providers.

The company's businesses include pharmaceutical distribution and specialty services, as well as the sourcing and distribution of medical and surgical products. Its offerings support areas such as specialty medications, medication management and supply-chain operations.

Cardinal Health traces its roots to a wholesale business founded in Ohio in 1971 and later expanded into pharmaceutical distribution.

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