Strategic Initiatives To Boost Cardinal Health's Q1 Results

(RTTNews) - Healthcare provider Cardinal Health Inc. (CAH) is slated to release its first-quarter report card on Monday, November 2, before the market open. Analysts polled by Thomson Reuters are estimating earnings of $1.10 per share on revenue of $27.18 billion.

In the last quarter, the company reported a 26% growth in profit, reflecting higher revenues at both its pharmaceutical and medical segments. Both revenue and adjusted earnings per share for the quarter beat analysts' estimates. The company returned $1.5 billion to shareholders through expanded dividends and share repurchases.

Growth Drivers

The company said its Harvard Drug Group acquisition strengthens its capabilities in generics, broadens its telemarketing reach, and of course, adds scale to its Red Oak joint venture with CVS Health.

Specialty business continues its strong growth, and the company expects that Specialty Solutions will finish fiscal 2016 with revenues in excess of $8 billion. Medical segment is expected to grow at mid-single-digit rates and finish the year with momentum. Of note, the Medical segment will have a challenging first quarter as a result of some discrete items, the largest being the wind down of a post-spend CareFusion contract in Canada which Mike will cover.

Meanwhile, Cardinal Health expects to fortify its presence in China, as healthcare market in China is still in its early phases of growth and continues to represent a significant opportunity.

For Fiscal 2016...

Cardinal Health raised the midpoint of its outlook for adjusted earnings per share from continuing operations, citing its strong fiscal year 2015 performance and the momentum the company has carried into fiscal year 2016.

The company now forecasts full-year adjusted earnings in a range to $4.85 - $5.05 per share, which represents an 11% - 15% growth rate. Earlier, the company expected adjusted earnings of $4.75 - $5.05 per share. The Street now expects earnings of $5.02 per share versus its prior view of $4.93 per share for fiscal 2016.

Fiscal 2016 will also include a full year of the Harvard acquisition, which closed in early July. The company expects this to ramp through fiscal 2016 resulting in non-GAAP EPS accretion of greater than $0.15 per share net of the $0.03 - $0.04 of its interest expense for the related debt financing.

Also, the company expects fiscal 2016 consolidated company revenues to grow in the low-double digits.

October 4, Cardinal Health said it completed the acquisition of Johnson & Johnson's Cordis business, a global leader in cardiology and endovascular devices, for $1.944 billion. Planning has been ongoing since the acquisition announcement in early March 2015, and the integration is off to a successful start with management teams in place worldwide.

Cardinal Health expects the acquisition to be slightly dilutive to its fiscal 2016 non-GAAP diluted earnings per share from continuing operations.

The company expects fiscal 2017 accretion in non-GAAP diluted EPS of greater than $0.20 per share, inclusive of the cost of an incremental $0.07-$0.08 per share of interest expense associated with transaction financing, and for the acquisition to be increasingly accretive thereafter. The company continues to assume that synergies will exceed $100 million annually exiting fiscal 2018.