Cardinal Health Inc. (CAH) has continued its strong operational performance, navigating industry challenges with discipline and prudence. The healthcare services and products company has strategically invested in high-growth segments to drive sustainable long-term value, while optimizing its core distribution business. With a diversified product portfolio, enhanced service capabilities, and targeted M&A, Cardinal Health appears well-positioned to capitalize on favorable industry trends.
Business Overview Cardinal Health was founded in 1979 and has grown to become a leading global healthcare services and products company. Headquartered in Dublin, Ohio, the company provides customized solutions for hospitals, healthcare systems, pharmacies, ambulatory surgery centers, clinical laboratories, physician offices, and patients in the home. Cardinal Health operates in two main reportable segments - Pharmaceutical and Specialty Solutions (Pharma), and Global Medical Products and Distribution (GMPD).
In its early years, Cardinal Health focused on growth through acquisitions and expanding its distribution network across the United States. Key milestones included the acquisition of Bindley Western Industries in 1998, which expanded the company's pharmaceutical distribution business, and the acquisition of Owen Healthcare in 1996, which added pharmacy management services. Throughout the 2000s, Cardinal Health continued to grow both organically and through acquisitions, strengthening its position as a leading healthcare services and products provider.
The company has faced challenges in recent years, including opioid-related lawsuits and investigations, as well as the loss of a major customer contract with OptumRx in 2024. To address these issues, Cardinal Health implemented enterprise-wide cost savings measures and focused on expanding into higher growth, higher margin business areas like specialty pharmaceutical distribution and services.
The Pharma segment distributes branded and generic pharmaceutical, specialty pharmaceutical, and over-the-counter healthcare and consumer products in the United States. This segment also provides services to pharmaceutical manufacturers and healthcare providers for specialty pharmaceutical products, pharmacy management services to hospitals, and operates a limited number of pharmacies. The GMPD segment manufactures, sources, and distributes Cardinal Health branded medical, surgical, and laboratory products, which are sold in the United States, Canada, Europe, Asia, and other markets. In addition to Cardinal Health branded products, this segment also distributes a broad range of national brand medical, surgical, and laboratory products to healthcare providers.
Cardinal Health has strategically expanded its service offerings beyond traditional distribution, investing in higher-margin specialty and biopharmaceutical solutions. The company's BioPharma Solutions business includes specialty distribution, third-party logistics, group purchasing organizations, patient access and support programs, regulatory and clinical consulting, and real-world data and evidence services. These value-added services have been a key driver of growth, complementing the company's core distribution capabilities.
Financials Financial Performance In fiscal year 2024, Cardinal Health reported revenue of $226.83 billion, a 10.7% increase from the prior year. Net income for the year was $852 million, with diluted earnings per share of $3.45. The company generated $3.76 billion in operating cash flow and $3.25 billion in free cash flow.
For the six months ended December 31, 2024, Cardinal Health reported revenue of $107.54 billion, a 4.0% decrease from the prior-year period. However, this decline was primarily due to the expiration of a large customer contract, as the company saw strong underlying growth of 16% excluding this impact. Net income for the first half of fiscal 2025 was $818 million, with diluted earnings per share of $3.35.
In the most recent quarter (Q2 2025), Cardinal Health reported revenue of $55.26 billion, down 4% year-over-year, and net income of $400 million. The revenue decrease was primarily due to the expiration of the OptumRx contracts, partially offset by branded and specialty pharmaceutical sales growth from existing and new customers.
Cardinal Health's balance sheet remains strong, with $3.8 billion in cash and equivalents as of December 31, 2024. Total debt stood at $5.09 billion, resulting in a net debt position of $1.29 billion. The company's disciplined capital allocation strategy has included investments in the business, maintaining an investment-grade credit rating, and returning capital to shareholders through dividends and share repurchases.
Liquidity Cardinal Health's strong balance sheet and cash flow generation provide ample liquidity to support its operations and strategic initiatives. The company's investment-grade credit rating allows for favorable access to capital markets when needed. With $3.8 billion in cash and equivalents, Cardinal Health maintains a solid financial position to navigate potential challenges and pursue growth opportunities.
The company's liquidity position is further strengthened by its available credit lines, including a $3 billion commercial paper program, a $2 billion revolving credit facility, and a $1 billion 364-day revolving credit facility. Cardinal Health's current ratio stands at 1.02, while its quick ratio is 0.54, indicating sufficient short-term liquidity to meet its obligations.
Segment Performance The Pharmaceutical and Specialty Solutions segment, which accounts for over 90% of total revenue, saw a 4% decrease in revenue to $50.85 billion in Q2 2025 and a 5% decrease to $98.84 billion in the first half of the fiscal year. This decline was primarily due to the expiration of the OptumRx contracts, which had generated 17% of consolidated revenue in fiscal 2024. However, segment profit increased 7% to $531 million in Q2 and 12% to $1.06 billion in the first half, driven by increased contribution from branded and specialty pharmaceutical products and growth in the BioPharma Solutions business.
The Global Medical Products and Distribution segment reported a 1% increase in revenue to $3.15 billion in Q2 and a 2% increase to $6.28 billion in the first half. Segment profit increased to $18 million in Q2 and $26 million in the first half, primarily due to cost optimization initiatives, partially offset by higher manufacturing and health and welfare costs.
The company's Other segment, which includes Nuclear and Precision Health Solutions, at-Home Solutions, and OptiFreight Logistics, saw revenue increase 13% to $1.28 billion in Q2 and $2.47 billion in the first half. Segment profit for Other increased 11% to $118 million in Q2 and 10% to $222 million in the first half.
Strategic Initiatives and Outlook Cardinal Health has been proactive in reshaping its portfolio and service offerings to capitalize on industry trends. The company's strategic focus on specialty pharmaceutical and biopharmaceutical solutions has driven strong growth in its Pharma segment. Cardinal Health has made several key acquisitions, including Specialty Networks in 2024 and the recent additions of Integrated Oncology Network (ION) and GI Alliance, to expand its presence in higher-margin specialty care segments.
In the GMPD segment, Cardinal Health has been executing on its improvement plan, with a focus on cost optimization, supply chain enhancements, and customer service initiatives. While this segment has faced some near-term headwinds, the company remains confident in its ability to drive sustainable profit growth through these operational initiatives.
Looking ahead, Cardinal Health has raised its fiscal 2025 earnings guidance to a range of $7.85 to $8.00 per share, an increase of $0.10 at the midpoint from the prior guidance. This reflects the company's confidence in its strategic direction and ability to navigate industry challenges. For the Pharmaceutical and Specialty Solutions segment, revenue is expected to decline 1% to 3%, reflecting the addition of GI Alliance and ION acquisitions. Normalizing for the customer transition and acquisitions, the fiscal 2025 revenue growth at the midpoint would be approximately 20%. Segment profit is expected to grow 10% to 12% for the full year.
For the GMPD segment, the revenue outlook remains unchanged at 2% to 4% growth, while segment profit guidance has been adjusted to a range of $130 million to $150 million. The Other businesses are expected to see revenue growth of 10% to 12% and segment profit of approximately 10%.
The company continues to invest in technology, automation, and capabilities that strengthen its position as a trusted healthcare partner. Cardinal Health's diverse portfolio of pharmaceutical distribution, specialty services, and medical products continues to generate solid financial results, with growth in key areas offsetting the impact of the OptumRx contract expiration.
Risks and Conclusion Cardinal Health faces risks inherent to the healthcare distribution industry, including customer concentration, regulatory changes, and pricing pressures. The company's reliance on a limited number of large customers, such as the recent expiration of the OptumRx contract, poses a risk to its revenue and profitability. Additionally, the company's operations are subject to extensive government regulations, which can impact its business activities and compliance costs.
Cardinal Health has also been named as a defendant in lawsuits related to the distribution of opioid pain medications. As of December 31, 2024, the company has accrued $4.9 billion related to opioid litigation settlements, which represents a significant financial liability.
Despite these challenges, Cardinal Health has demonstrated its ability to adapt and execute on its strategic priorities. The company's diversified product portfolio, enhanced service capabilities, and targeted M&A have positioned it well to capitalize on favorable industry trends. With a focus on operational discipline and strategic investments, Cardinal Health appears poised to deliver sustainable long-term value for its shareholders.
Cardinal Health operates primarily in the United States, with over 98% of revenue generated domestically. The pharmaceutical distribution industry has seen steady low-to-mid single-digit revenue growth over the past 5 years, with Cardinal Health's Pharmaceutical segment growing revenue at a compound annual growth rate of 5-6% during this period.
In conclusion, Cardinal Health's strong operational performance, strategic investments, and robust liquidity position provide a solid foundation for future growth. While facing challenges such as the OptumRx contract expiration and ongoing opioid-related liabilities, the company's diversified business model and focus on high-growth segments position it well to navigate the evolving healthcare landscape and deliver value to stakeholders.