CAH Q3 Earnings Beat Estimates, '25 EPS View Raised, Stock Gains

Cardinal Health, Inc. CAH reported third-quarter fiscal 2025 adjusted earnings per share (EPS) of $2.35, which beat the Zacks Consensus Estimate of $2.15 by 9.3%. The bottom line also improved 12.4% year over year.

GAAP EPS in the quarter was $2.10 compared with $1.07 in the year-ago period. (Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.)

Revenue Details

Sales were flat on a year-over-year basis at $54.89 billion. However, the top line missed the Zacks Consensus Estimate by 0.2%.

Cardinal Health, Inc. Price, Consensus and EPS Surprise

Cardinal Health, Inc. price-consensus-eps-surprise-chart | Cardinal Health, Inc. Quote

Segmental Analysis

Pharmaceutical and Specialty Solutions

Pharmaceutical revenues decreased 0.4% to $50.4 billion on a year-over-year basis. The decline was due to the unfavorable impact of the customer contract expiration with OptumRx in June 2024, almost offset by growth from existing and new customers. Excluding this impact, sales were up 20%, driven by branded and specialty pharmaceutical sales growth from existing Pharmaceutical Distribution and Specialty Solutions customers.

Pharmaceutical profit totaled $662 million, up 14% from the year-ago period. The upside was driven by growth in brand and specialty products, MSO platforms (including GI Alliance), BioPharma Solutions (including Specialty Networks) and positive generics program performance. This growth was partially offset by the customer contract expiration.

Global Medical Products and Distribution

Revenues in this segment totaled $3.2 billion, up 2% year over year, driven by growth volume from existing customers.

The segment reported a profit of $39 million compared with $22 million in the year-ago quarter. This upside was primarily driven by cost optimization initiatives.

Other

This segment includes three operating segments — at-Home Solutions, Nuclear and Precision Health Solutions, and OptiFreight Logistics. Sales totaled $1.3 billion, up 13% year over year.

The segment’s profit amounted to $134 million, up 22% from the year-ago level. The upside was driven by the robust performance across the three operating segments.

Margin Analysis

Gross profit increased 9.7% year over year to $2.12 billion.

As a percentage of revenues, the gross margin in the reported quarter was 3.9%, expanding nearly 30 basis points year over year.

Distribution, selling, general and administrative expenses totaled $1.32 billion, up 3.6% year over year.

Operating income amounted to $730 million, up 97.8% year over year. Adjusted operating income increased 21% year over year to $807 million.

Financial Update

The company exited the reported quarter with cash and cash equivalents of $3.33 billion compared with $3.81 billion in the fiscal second quarter of 2025.

Net cash provided by operating activities totaled $2.91 billion against $27 million in net cash used in the year-ago period.

2025 View Updated

Cardinal Health updated its fiscal 2025 earnings guidance. The company now anticipates adjusted EPS to be between $8.05 and $8.15, up from the previous guidance of $7.85-$8.00. The Zacks Consensus Estimate for the same is pegged at $7.94.

The company expects revenues from its Pharmaceutical segment to decline 4-6% year over year. Segmental profit is likely to increase 11.5-12.5%, up from the previous guidance of 10-12%.

Revenues from the Medical segment are estimated to grow 3-5%. Segmental profit is expected to be in the range of $130-$140 million compared with the previous guidance of $130-$150 million.

Revenues from the Other segment are likely to grow 10-12%. Segmental profit is likely to grow 16-18%, up from the previous guidance of nearly 10%.

The company expects its fiscal 2026 EPS to grow in double-digit percentage points despite looming economic uncertainty. The company continues to expect strong segment profit growth for Pharmaceutical and Specialty Solutions and at-Home Solutions, Nuclear and Precision Health Solutions, and OptiFreight Logistics during the next fiscal year. The company anticipates the segmental profit for Medical to be at least consistent with the fiscal 2025 level.

Conclusion

Cardinal Health exited the fiscal third quarter on a mixed note, with earnings beating estimates but revenues missing the same. However, the company continued to witness strong demand for its Pharmaceutical and Specialty solutions. The company’s growth from existing customers almost completely offset the loss of sales due to Optum Rx contract expiration. The strong growth in profit across its three segments also looks promising.

Despite mixed results, shares of CAH were up 0.5% in pre-market trading. The company’s shares have gained 19.5% so far this year compared with the industry’s 0.9% growth. The broader S&P 500 Index has decreased 5.7% in the same time frame.

Meanwhile, CAH’s medical products, at-Home Solutions, Nuclear and Precision Health Solutions and OptiFreight Logistics are likely to support top-line growth going forward. An improvement in segmental profit looks promising. The expansion of gross margin also bodes well. Also, CAH announced the completion of its acquisition of Advanced Diabetes Supply Group. This acquisition is likely to boost CAH’s at-home business due to its leadership in national direct-to-patient diabetes medical supplies. Moreover, a partnership with GE HealthCare for the manufacturing and distribution of Flyrcado, a first-of-its-kind PET agent for enhanced diagnosis of coronary artery disease, should bring additional sales.

However, intense competition and customer concentration are concerning.

CAH’s Zacks Rank and Other Stocks to Consider

Cardinal Health carries a Zacks Rank #2 (Buy) at present.

Some other top-ranked stocks from the same medical industry are Fresenius Medical Care FMS, Masimo MASI and AdaptHealth AHCO.

Fresenius Medical, carrying a Zacks Rank #2 at present, has an estimated growth rate of 28.9% for 2025. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

FMS’ earnings beat estimates in three of the trailing four quarters and met in one, delivering an average surprise of 15.67%. The company is expected to release first-quarter results next month.

FMS’ shares have gained 12.1% so far this year.

Masimo, carrying a Zacks Rank of 2 at present, has an estimated growth rate of 20% for 2025.

MASI’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 14.41%. Its shares have risen 58.5% compared with the industry’s 3.9% growth year to date. The company is expected to release first-quarter results in May.

MASI’s shares have lost 2.6% so far this year.

AdaptHealth, carrying a Zacks Rank #2 at present, has an estimated earnings growth rate of 16.7% for 2025.  The company’s earnings beat estimates in three of the trailing four quarters and missed in one, delivering an average negative surprise of 4.17%. The company is expected to release first-quarter results next month.

AHCO's shares have lost 10.6% so far this year.

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This article originally published on Zacks Investment Research (zacks.com).

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