Cardinal Health beats earnings estimates
Cardinal Health shares increased by more than 6 percent to close at $54.24 on Thursday after the Dublinbased company announced better-than-expected earnings for its second quarter and raised the outlook for fiscal 2019.
Cardinal, one of the nation’s largest drug distributors and supplier of a wide range of medical products to hospitals, reported earnings of $280 million, or $1.29 per share, on revenue of $37.7 billion for the quarter. That beat estimates by stock analysts surveyed by Zacks Investment Research by 20 cents per share.
The results include the impact of one-time gains and costs; excluding those,
profit was 93 cents per share.
Revenue increased by 7 percent compared with the same quarter a year ago, while earnings decreased by 15 percent. The company also said it now expects full-year earnings to be $4.97 to $5.17 per share, up from its previous outlook of $4.90 to $5.15.
Cardinal CEO Mike Kaufmann said Cardinal is well positioned to navigate changes in drug pricing proposed by the Trump administration last week. The plan is an attempt to redirect some discounts
and rebates back to customers, away from drug middlemen who sometimes profit from them.
In a Thursday phone interview, Kaufmann explained that Cardinal’s distribution unit buys drugs from manufacturers at list price, but sells at discounted prices agreed upon between the manufacturers and customers such as hospitals. Cardinal and the other major distributors “have a sophisticated system” to track and charge back the difference in price to the drugmakers.
While many details need to be worked out in how the administration’s proposal is put into practice, “the idea is that we could potentially expand that system ...
and expand our services,” Kaufmann said.
The performance of Cardinal’s medical segment continued to lag the drug distribution side of the business. Kaufmann said Cardinal remains on track to turn its Cordis unit — which sells cardiovascular and endovascular products — to profitability by the end of the company’s 2019 fiscal year in June. He said Cardinal has been investing in technology systems and the supply chain for Cordis, as well as exiting the market in countries “where the risk-reward proposition wasn’t there for us.”