Cardinal Health topped Wall Street's expectations on Tuesday and CAH stock briefly broke out before sliding below its 50-day line.
The company attributed its strong fiscal fourth-quarter growth to the increasing popularity of weight-loss and diabetes drugs in the GLP-1 class. This includes Eli Lilly's Mounjaro and Novo Nordisk's Ozempic, Wegovy and Rybelsus.
Cardinal Health's take echoes commentary from other drug and medical device wholesalers AmerisourceBergen and McKesson, J.P. Morgan analyst Lisa Gill said in a note to clients.
"Management (noted) that the increased revenue could be attributed to 'continued growth of GLP-1 medications, which do not meaningfully contribute to segment profit,'" she said.
But on today's stock market, CAH stock slipped 2.6% to 90.57. Earlier, shares broke out of a flat base with a buy point at 95.10, according to MarketSmith.com. The dip put Cardinal Health stock below its 50-day moving average.
CAH Stock: Pharma Segment Drives Growth
During the June quarter, Cardinal Health earned an adjusted $1.55 per share on $53.45 billion in sales. Earnings beat CAH stock analyst forecasts for $1.49 a share. Analysts also projected a lower $52.72 billion in sales, according to FactSet. Sales grew 13% while earnings rocketed 48%.
Cardinal Health cited "brand and specialty pharmaceutical sales growth from existing customers" for its strong drug delivery sales. Sales in the pharmaceutical division beat expectations, growing 15% to $49.7 billion. Revenue from the medical segment — which delivers products and supplies — was flat at $3.8 billion, though also topped forecasts.
Investors in CAH stock are now zeroing in on Cardinal Health's efforts to improve its medical division, which has struggled in recent quarters. Cardinal noted it saw a decrease in products and distribution sales related to lower demand for personal protective equipment, or PPE. Offsetting that, inflationary impacts eased somewhat.
"We expect medical performance in the context of fiscal year 2024 to be the focus of the call as much of the investor discourse around Cardinal Health has been driven by the medical turnaround story," Gill said.
She kept her neutral rating on CAH stock.
Raised Profit Outlook Comes In Light
For fiscal year 2024, which began July 1, Cardinal Health raised its adjusted earnings outlook by a nickel per share. Now, the company expects to earn $6.50-$6.75 per share. Analysts projected adjusted profit of $6.64 per share, which is slightly above the midpoint of Cardinal Health's outlook.
Cardinal Health also now expects pharmaceutical sales to grow 10% to 12% this year, above its previous view for about 10% growth. But the company lowered profit growth expectations to 4% to 6% due to a tougher comparison vs. fiscal year 2023 growth.
CAH stock has strong IBD Digital Relative Strength and Composite ratings of 88 and 91, respectively. This puts shares in the top 11% of all stocks when it comes to 12-month performance and the leading 9% in terms of fundamental and technical measures.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
