Cardinal Health
(NYSE:CAH) beat Wall Street’s earnings consensus by 10% for the fourth quarter of 2019, despite a disappointing performance by its medical sector.
The Dublin, Ohio-based company posted profits of $194 million or $0.65 per share on sales of $37.4 billion for the three months ended June 30, 2019, for a bottom-line gain of 117% on sales growth of 5.9% compared with Q4 2018.
Adjusted to exclude one-time items, earnings per share were $1.11, 18¢ ahead of The Street, where analysts were looking for sales of $36.81 million.
For the full year 2019, Cardinal Health reported profits jumped 438% to $1.4 billion on sales of $145.5 billion, up 6.36% over FY 2018. Full-year 2019 adjusted EPS came in at $5.28, 28¢ ahead of The Street, where analysts were looking for sales of $144.92 billion.
Medical segment profit decreased 15% to $97 million for the quarter, driven primarily by Cardinal Health-brand products, departing CFO Jorge Gomez told analysts during an earnings call this morning transcribed by Seeking Alpha. A charge related to an exclusive distribution agreement that Cardinal signed two years ago with a supplier for Cordis was the primary reason for that profit dip, added CEO Mike Kauffman. He declined to elaborate.
Cardinal Health bought Cordis from Johnson & Johnson (NYSE:JNJ) for $1.94 billion in 2015. Cordis has been struggling with fill rates and backorders, but is improving in those areas, Kauffmann said.
Overall cost savings for the year totaled $133 million, which will allow the company to make strategic reinvestments and generate significant savings, Kaufmann told analysts. Those savings helped offset the medical results for the quarter, but for the full year, medical revenue was flat at $15.6 billion, Gomez noted. Growth from existing customers was offset by the net impact of acquisitions and divestitures, he added.
The company expects low-single-digit revenue growth and low-double-digit property growth in medical, helped by Cardinal brand products. “We also, as you know, don’t plan to do any product acquisitions in the near future in that space or M&A around products in that space so that we can focus on execution,” Kauffmann told analysts.
“The fourth quarter capped off a year of progress for Cardinal Health,” Kauffman said in a news release. “During fiscal 2019, we delivered on our overall commitments and made significant strides on key initiatives that position us for growth in an evolving healthcare environment. While we still have work to do, we look forward to building on this foundation in the coming year and continuing to enhance the value we provide to our customers and their patients.”
For FY 2020, Cardinal said it expects to record restructuring charges of $120 million to $145 million, as well as cost savings of $130 million from simplifying the company’s operating model and cost structure.
Cardinal also said it expects to log adjusted EPS of $4.85 to $5.10 in 2020.
The company also announced some executive changes, promoting Stephen Mason from his position as president of the company’s At-Home Solutions business to CEO of its medical segment, to replace medical CEO Jon Giacomin. The company also signed David Evans as interim CFO on July 29 while it conducts an external search for Gomez.
CAH shares closed up 2.67% today at $43.89.
