DUBLIN, Ohio, Feb. 7, 2017 /PRNewswire/ -- Cardinal Health (NYSE: CAH) today reported second-quarter fiscal year 2017 revenue of $33.1 billion, an increase of 5 percent. The company also reported a decline in GAAP operating earnings of 4 percent to $542 million and in non-GAAP operating earnings of 4 percent to $701 million. GAAP diluted earnings per share (EPS) increased 4 percent to $1.02, while non-GAAP diluted EPS increased 3 percent to $1.34.
"Our organization has shown great resilience in the first half of our fiscal 2017. While pricing in the generic pharmaceutical market was a significant headwind for our Pharmaceutical segment profit and our enterprise operating earnings, overall we are seeing greater growth in more lines of business than we've seen in some time," said George Barrett, chairman and CEO of Cardinal Health. "Of particular note, we saw strong growth in our Specialty Solutions group, and our Medical segment, where virtually every part of that business grew.
"As we enter the second half of the year, our organization continues to work with a clear sense of purpose patient-centered and squarely focused on helping our partners improve the quality, safety and efficiency of the healthcare system."
Q2 FY17 summary
Q2 FY17 | Q2 FY16 | Y/Y | |
Revenue | $33.1 billion | $31.4 billion | 5% |
Operating earnings | $542 million | $563 million | (4)% |
Non-GAAP operating earnings | $701 million | $726 million | (4)% |
Net earnings attributable to Cardinal Health, Inc. | $324 million | $326 million | N.M. |
Non-GAAP net earnings attributable to Cardinal Health, Inc. | $427 million | $430 million | (1)% |
Diluted EPS attributable to Cardinal Health, Inc. | $1.02 | $0.98 | 4% |
Non-GAAP diluted EPS attributable to Cardinal Health, Inc. | $1.34 | $1.30 | 3% |
Diluted EPS for the quarter benefitted from a lower effective tax rate and fewer weighted average shares outstanding than the same quarter in the prior fiscal year.
Segment results
Pharmaceutical segment
Second-quarter revenue for the Pharmaceutical segment increased 5 percent to $29.7 billion due to growth from existing Pharmaceutical Distribution customers and strong performance from the Specialty business.
Segment profit for the quarter decreased 14 percent to $537 million. This decrease was driven by generic pharmaceutical pricing and, to a lesser extent, the previously announced loss of a large Pharmaceutical Distribution customer. This was partially offset by solid performance from Red Oak Sourcing.
Q2 FY17 | Q2 FY16 | Y/Y | |
Revenue | $29.7 billion | $28.3 billion | 5% |
Segment profit | $537 million | $627 million | (14)% |
Medical segment
Second-quarter revenue for the Medical segment increased 8 percent to $3.4 billion, driven by contributions from net new and existing customers.
Segment profit increased 50 percent to $159 million due to the contribution from Cardinal Health Brand products, which includes Cordis. The increase reflects the $21 million unfavorable impact of the Cordis-related inventory fair value step-up in the second quarter of fiscal year 2016. Excluding this step-up, year-over-year Medical segment profit growth was 25 percent.
Q2 FY17 | Q2 FY16 | Y/Y | |
Revenue | $3.4 billion | $3.2 billion | 8% |
Segment profit | $159 million | $106 million | 50% |
Fiscal year 2017 outlook
As previously disclosed, the company does not provide GAAP EPS outlook, because it is unable to reliably forecast most of the items that are excluded from GAAP EPS to calculate non-GAAP EPS. These items could cause EPS to differ materially from non-GAAP EPS. See "Use of Non-GAAP Measures" following the attached schedules for additional explanation.
Having completed more than half its fiscal year, the company is adjusting its fiscal year 2017 guidance range for non-GAAP diluted EPS from continuing operations to $5.35 to $5.50 from $5.40 to $5.60. This now reflects non-GAAP EPS growth of 2 to 5 percent for the fiscal year.
More details about this outlook can be found on the company's webcast and accompanying slides; see below for details.
Additional second-quarter and recent highlights
- Renewed Department of Defense medical/surgical distribution prime vendor agreement
- Signed several new strategic distribution agreements that will enable Cordis, Cardinal Health's interventional vascular business, to rapidly expand its product portfolio in select countries globally
- Recognized Cincinnati Children's Hospital Medical Center as the recipient of the 2016 Award for Excellence in Medication Safety from the Cardinal Health Foundation and the American Society of Health-System Pharmacists Foundation
- Chairman and CEO George Barrettnamed chairman of the Healthcare Leadership Council; Pharmaceutical Segment CEO Jon Giacominnamed chairman of the Healthcare Distribution Alliance board
Webcast
Cardinal Health will host a webcast today at 8:30 a.m. Eastern to discuss second-quarter results. To access the webcast and corresponding slide presentation, go to the Investor Relations page at ir.cardinalhealth.com. No access code is required.
Presentation slides and a webcast replay will be available on the Cardinal Health website at ir.cardinalhealth.com until Feb. 6, 2018.
Upcoming webcasted investor events
- Barclays Global Healthcare Conference on March 16 at 8:30 a.m. Eastern in Miami
About Cardinal Health
Cardinal Health Inc. is a global, integrated healthcare services and products company, providing customized solutions for hospital systems, pharmacies, ambulatory surgery centers, clinical laboratories and physician offices worldwide. The company provides clinically-proven medical products and pharmaceuticals and cost-effective solutions that enhance supply chain efficiency. Cardinal Health connects patients, providers, payers, pharmacists and manufacturers for integrated care coordination and better patient management. Backed by nearly 100 years of experience, with more than 37,000 employees in nearly 60 countries, Cardinal Health ranks among the top 25 on the Fortune 500. For more information, visit cardinalhealth.com, follow @CardinalHealth on Twitter and connect on LinkedIn at linkedin.com/company/cardinal-health.
1 GAAP refers to U.S. generally accepted accounting principles. This news release includes GAAP financial measures as well as non-GAAP financial measures, which are financial measures not calculated in accordance with GAAP. See "Use of non-GAAP Measures" following the attached schedules for definitions of the non-GAAP financial measures presented in this news release, and see the attached schedules for reconciliations of the differences between the non-GAAP financial measures and their most directly comparable GAAP financial measures.
Cardinal Health uses its website as a channel of distribution for material company information. Important information, including news releases, financial information, earnings and analyst presentations, and information about upcoming presentations and events is routinely posted and accessible on the Investor Relations page at ir.cardinalhealth.com. In addition, the website allows investors and other interested persons to sign up automatically to receive e-mail alerts when the company posts news releases, SEC filings and certain other information on its website.
Cautions Concerning Forward-Looking Statements
This news release contains forward-looking statements addressing expectations, prospects, estimates and other matters that are dependent upon future events or developments. These statements may be identified by words such as "expect," "anticipate," "intend," "plan," "believe," "will," "should," "could," "would," "project," "continue," "likely," and similar expressions, and include statements reflecting future results, trends or guidance, statements of outlook and expense accruals. These matters are subject to risks and uncertainties that could cause actual results to differ materially from those projected, anticipated or implied. These risks and uncertainties include competitive pressures in Cardinal Health's various lines of business; the amount or rate of generic and branded pharmaceutical price appreciation or deflation and the timing of and benefit from generic pharmaceutical introductions; the ability to maintain the benefits from the generic sourcing venture with CVS Health; the ability to successfully integrate and realize the benefits from the acquisition of Cordis; the risk of non-renewal or a default under one or more key customer or supplier arrangements or changes to the terms of or level of purchases under those arrangements; uncertainties due to government health care reform including recent proposals to modify or repeal the Affordable Care Act; uncertainties with respect to U.S. tax and trade laws, including proposals relating to a "border adjustment tax" and new import tariffs; changes in the distribution patterns or reimbursement rates for health care products and services; the effects of any investigation or action by any regulatory authority; and changes in foreign currency rates and the cost of commodities such as oil-based resins, cotton, latex and diesel fuel. Cardinal Health is subject to additional risks and uncertainties described in Cardinal Health's Form 10-K, Form 10-Q and Form 8-K reports and exhibits to those reports.
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