Cardinal Health Raises Profit Outlook To $12.80-$13 And Says It Wants No 'Fourth Leg' For Deals
CEO Jason Hollar said acquisitions will stay within existing businesses as the drug distributor lifted full-year earnings guidance.
Cardinal Health, the drug and medical-products distributor, raised its fiscal 2027 adjusted earnings guidance to $12.80 to $13 a share from $12.40 to $12.60, Chief Financial Officer Aaron Alt said on the company's first-quarter earnings call Thursday. On the same call, CEO Jason Hollar told analysts that future deals will stay inside its existing businesses: "we're not looking for a fourth leg of this stool."
A quarter that cleared $1 billion in operating income
Alt said first-quarter revenue grew 5% to $67.5 billion, gross profit rose 12% to $2.6 billion, and operating income climbed 17% to $1 billion, the first time the company has reached that mark in a quarter. Diluted earnings per share grew 28% to $3.26.
In the pharma segment, revenue rose 6% to $62.6 billion and profit rose 17% to $783 million. Specialty sales grew 18%, which Alt said ran a bit above management's original double-digit expectation. Cardinal raised its pharma profit growth guidance to 10% to 12% from 8% to 11%.
The businesses grouped as "other," which include at-home care, nuclear and precision health, and OptiFreight, grew revenue 7% to $1.8 billion, with profit up 16% to $193 million. Alt said the global medical products segment earned $33 million, and that high petroleum costs tied to the Iran conflict are pushing its full-year profit toward the low end of its $200 million to $220 million range.
Shares rose 3.44% to $270.94 in Thursday trading, according to the market report.
Singles, doubles and no fourth leg
Asked by a Leerink Partners analyst how urology, distribution and physician-practice assets add up to more than their parts, Hollar described a specialty ecosystem in which each connection is "a series of singles and doubles and not home runs." Each is "rarely the driver, the primary driver," he said.
On acquisitions, Hollar told a UBS analyst that Cardinal's answer on where to grow "could be very different than our competition's answer, and we all could be right." He pointed to fragmented markets: physician-practice networks, biopharma services such as third-party logistics and patient hubs, and at-home care. A partnership, he said, "doesn't have to be an acquisition."
Alt said Cardinal repurchased $500 million of stock in the first quarter, half its $1 billion annual commitment, and ended the quarter with $5.3 billion in cash. That leaves room for more acquisitions or more capital returns, he said.
Red Oak and ADAPT are next
Hollar said Cardinal will look to address its Red Oak generic sourcing contract relatively soon. Alt said the ADAPT acquisition in at-home care should close at some point after the turn of the calendar year.
Alt guided to earnings growth that moderates in the second and third quarters before strengthening in the fourth to a level modestly below the first.
Sources
- Cardinal Kicks Off 2027 With Margin Expansion and Accelerating Specialty Business | Morningstar — morningstar.com
- We're raising our price target on Cardinal Health after another stellar quarter of profits — CNBC
- CAH Q1 Earnings & Revenues Beat Estimates on Pharma Strength — Yahoo Finance
- Cardinal Health beats top-line and bottom-line estimates; raises FY26 outlook | Seeking Alpha — seekingalpha.com
- Nasdaq Tumbles 4.5%; Cardinal Health Shares Gain After Upbeat Q1 Earnings — benzinga.com
