CAH Financial Analysis

Analysis Date: 1/31/2025

Business Model

Cardinal Health generates revenue primarily through pharmaceutical distribution and medical/surgical supplies distribution

Revenue Sources

• Pharmaceutical and Specialty Solutions (92% of revenue) - Distribution of branded and generic pharmaceuticals
• Global Medical Products and Distribution (6% of revenue) - Medical supplies and Cardinal-branded products
• Other (2% of revenue) - Nuclear, at-Home Solutions, and OptiFreight Logistics

Revenue Distribution by Channel

• Pharmaceutical distribution to healthcare providers, pharmacies and hospitals

Income Statement Analysis

• Revenue decreased 4% but increased 16% excluding impact of customer contract expiration
• Gross margin improved 5% driven by growth across all segments
• Operating earnings grew 9% led by Pharmaceutical segment performance

Balance Sheet Analysis

• Cash position decreased due to acquisition-related payments
• Inventory levels increased 13% from June 2024
• Shareholders deficit improved slightly from June 2024

Cash Flow Analysis

• Operating cash flow negative due to working capital timing
• Higher investing outflows from acquisitions
• Financing inflows from new debt issuance for acquisitions

Capital Allocation

Cardinal Health maintains a disciplined capital allocation framework prioritizing: 1) Investment in organic growth, 2) Maintaining investment grade rating, 3) Baseline return of capital to shareholders through dividends and buybacks, 4) Strategic M&A, and 5) Additional opportunistic share repurchases. Company has committed to $750M in share repurchases for FY25.

Management Commentary

Strong Q2 results driven by robust demand across Pharmaceutical segment

Successfully closed ION acquisition and announced GI Alliance closing

GMPD segment faced some headwinds but cost optimization initiatives progressing

Overall Sentiment: Positive, with management expressing confidence in strategic direction and raising full year guidance

Recommendation

Rating: Buy

Reason for Rating: Strong core business momentum and strategic acquisitions position company well for growth

Disclaimer: This analysis is based on company filings and public information. It is for informational purposes only and not financial advice. Past performance does not guarantee future results.

Generated on: 1/31/2025, 1:01:03 PM