Cardinal Health raises outlook as pharmaceutical unit powers strong start

Cardinal Health lifts full-year earnings target

Cardinal Health, Inc. (NYSE:CAH) has raised its fiscal 2027 earnings outlook after a better-than-expected start to the year, despite a sharp profit setback in its medical products distribution arm. Revenue for the three months ended September 30 rose 5% to US$67.5 billion, while GAAP diluted earnings per share increased 27% to US$2.38.

The company now expects fiscal 2027 non-GAAP diluted EPS of US$12.80 to US$13.00, up from its previous range of US$12.40 to US$12.60. Cardinal said the new range represents 17% to 19% growth against its fiscal 2026 baseline excluding a tariff refund, or 14% to 15% growth against reported fiscal 2026 results.

Pharmaceutical distribution drives the quarter

The main engine was Pharmaceutical and Specialty Solutions, where revenue rose 6% to US$62.6 billion and segment profit climbed 17% to US$783 million. Cardinal attributed the performance to brand and specialty pharmaceutical sales from existing customers, alongside positive performance from its generics programme.

That result more than offset weakness in Global Medical Products and Distribution. Revenue in the segment was broadly flat at US$3.2 billion, but profit fell 28% to US$33 million because of unfavourable distribution and foreign exchange impacts. Cardinal Health Brand growth provided only a partial offset.

The smaller businesses grouped under Other offered another positive contribution. Revenue increased 7% to US$1.8 billion, while profit rose 16% to US$193 million, supported by Nuclear and Precision Health Solutions, at-Home Solutions and OptiFreight Logistics.

Higher adjusted profit comes with important qualifications

Non-GAAP operating earnings rose 17% to US$1.0 billion and non-GAAP diluted EPS reached US$3.26, compared with US$2.55 a year earlier. The company also reported GAAP operating earnings of US$753 million, up 13%, and GAAP net earnings attributable to Cardinal Health of US$554 million, up 23%.

The adjusted figures exclude items including US$182 million of amortisation and other acquisition-related costs, US$94 million of acquisition-related cash and share-based compensation costs, and a US$47 million net litigation recovery. Cardinal says its non-GAAP measures are supplementary rather than substitutes for GAAP results. It does not provide GAAP guidance because the timing and value of several excluded items cannot be reliably forecast.

CVS renewal and acquisition add strategic weight

Cardinal said it had entered a binding letter of intent to renew its pharmaceutical distribution agreements with CVS Health, describing the arrangement as supportive of a long-standing relationship and continued volume growth in Pharmaceutical and Specialty Solutions. The filing does not present the renewal as a completed definitive contract.

The company also anticipates completing its acquisition of AdaptHealth’s Diabetes Health business in the third quarter of fiscal 2027. Alongside the planned transaction, Cardinal launched a real-world evidence study with Eli Lilly on inflammatory bowel disease treatment patterns and outcomes, and announced an additional US$1.0 billion in uncommitted revolving credit facilities.

Buyback lowers share count as risks remain

Cardinal completed a US$500 million accelerated share repurchase during the quarter. Its diluted weighted-average share count fell to 233 million from 239 million a year earlier, and the company has reduced its full-year share-count assumption to 231 million to 232 million from approximately 233 million.

Operating cash flow improved to US$1.398 billion from US$973 million, while non-GAAP adjusted free cash flow rose to US$1.583 billion from US$1.285 billion. The stronger cash generation provides a useful counterpoint to the company’s shareholders’ deficit of US$2.866 billion at September 30, although the quarter also included the buyback and US$126 million in common dividends.

The raised outlook still depends on execution in the generics programme and the company’s ability to manage pharmaceutical pricing, tariffs and potential supply disruptions. Cardinal also cited ongoing Department of Justice investigations involving possible Anti-Kickback Statute and False Claims Act violations. The next test is whether the Pharmaceutical and Specialty Solutions momentum can persist while the weaker medical products segment, new acquisition and legal exposures compete for management attention.