On October 31, 2016 Cardinal Health (NYSE: CAH) reported first-quarter fiscal year 2017 revenue of $32 billion, an increase of 14 percent from the comparable quarter last yea (Press release, Cardinal Health, OCT 31, 2016, View Source [SID1234516111])r. The company also reported a decline in GAAP operating earnings of 14 percent to $535 million and in non-GAAP operating earnings of 9 percent to $669 million. GAAP diluted earnings per share (EPS) decreased 17 percent to $0.96, while non-GAAP diluted EPS decreased 10 percent to $1.24.
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"Our first-quarter results were largely as we suggested they would be, with a healthy increase in revenue and a decrease in our operating earnings largely driven by conditions in the pharmaceutical distribution market," said George Barrett, chairman and CEO of Cardinal Health. "While short-term headwinds, particularly around pharmaceuticals, are quite challenging, our Medical segment had an excellent quarter building on the momentum coming out of fiscal year 2016. From an operating perspective, our metrics were strong in both of our reporting segments, and our strategic positioning is well-aligned with the changing needs of the market."
Q1 FY17 summary
Q1 FY17
Q1 FY16
Y/Y
Revenue
$
32.0
billion
$
28.1
billion
14%
Operating earnings
$
535
million
$
620
million
(14)%
Non-GAAP operating earnings
$
669
million
$
737
million
(9)%
Net earnings attributable to Cardinal Health Inc.
$
309
million
$
383
million
(19)%
Non-GAAP net earnings attributable to Cardinal Health Inc.
$
399
million
$
458
million
(13)%
Diluted EPS attributable to Cardinal Health Inc.
$
0.96
$
1.15
(17)%
Non-GAAP diluted EPS attributable to Cardinal Health Inc.
$
1.24
$
1.38
(10)%
Segment results
Pharmaceutical segment
First-quarter revenue for the Pharmaceutical segment increased 14 percent to $28.8 billion due to growth from net new and existing Pharmaceutical Distribution customers and, to a lesser extent, performance from the Specialty business.
Segment profit for the quarter decreased 19 percent to $534 million. This decrease was driven by generic pharmaceutical pricing and, to a lesser extent, reduced levels of branded inflation and the previously announced loss of a large Pharmaceutical Distribution customer. This was partially offset by solid performance from Red Oak Sourcing.
Q1 FY17
Q1 FY16
Y/Y
Revenue
$
28.8
billion
$
25.1
billion
14%
Segment profit
$
534
million
$
657
million
(19)%
Cardinal Health
Page 2
Medical segment
First-quarter revenue for the Medical segment increased 12 percent to $3.3 billion driven by contributions from acquisitions and net new and existing customers.
Segment profit increased 26 percent to $127 million due to contributions from acquisitions and Cardinal Health Brand products.
Q1 FY17
Q1 FY16
Y/Y
Revenue
$
3.3
billion
$
2.9
billion
12%
Segment profit
$
127
million
$
101
million
26%
Fiscal 2017 outlook
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.
Full-year Pharmaceutical segment profit is now expected to be down as a percentage in the mid-to-high single digits compared to fiscal year 2016, with the changes coming primarily from generic pharmaceutical pricing and, to a lesser extent, reduced levels of branded inflation. Based on first-quarter results and second-quarter expectations, the company slightly lowered its fiscal year 2017 guidance range for non-GAAP diluted EPS from continuing operations to $5.40 to $5.60 from $5.48 to $5.73, representing growth of approximately 3 to 7 percent from the prior year.
More details about this outlook can be found on the company’s webcast and accompanying slides; see below for details.
Additional first-quarter and recent highlights
•
Onboarded Medical segment customer Kaiser Permanente
•
Expanded the existing distribution agreement between Cordis and Biosensors, enabling Cordis to be the exclusive distributor for Biosensors’ coronary interventional products in Japan
•
Acquired TelePharm, a company that focuses on establishing telepharmacies in rural areas
•
Granted Cardinal Health Foundation funds to 17 community-based non-profit organizations nationwide to combat prescription drug misuse