Cardinal Health (NYSE: CAH) reported strong third-quarter results for fiscal year 2025 and raised its 2025 EPS [earnings per share] guidance, while acknowledging a business world that’s become more difficult to predict.
In his opening remarks during the May 1 earnings call, Cardinal Health CEO Jason Hollar said the financial results “demonstrate the continued acceleration of the momentum we’ve established in recent years, the underlying strength of our business, and the effectiveness of our strategy. In today’s increasingly complex macro environment, our role as health-care’s crucial link is more important than ever. Our team continuously navigates evolving market conditions and regulatory complexities within the health-care industry, allowing us to act with urgency and flexibility to best serve customers and patients.”
Cardinal Health’s actions amidst tariff uncertainties
Hollar tackled the topic of tariffs early in his remarks. “Cardinal Health has a strong U.S. footprint with over 99% of our enterprise revenue generated here,” the CEO noted. “Roughly 95% of our segment profit is generated from four of our five businesses, which are as yet largely unimpacted by tariffs or other regulatory actions. And we have invested approximately $7 billion in the last two years in the United States, including recent acquisitions, expanded domestic manufacturing, new distribution nodes, technology and automation, which has directly supported the delivery of our country’s health care.”
Cardinal Health’s pharmaceutical and specialty solutions led the way in Q3, but Hollar added, “Within our higher-margin other businesses — at-Home Solutions, nuclear, and OptiFrieght [logistics] — we see continued potential to expand our capabilities and create additional value.
“We are pleased to complete the acquisition of Advanced Diabetes Supply Group [in April] and would like to extend a warm welcome to the ADSG team.”
Later in the call, Hollar added, “We understand the importance of the United States competing in a fair global market, and we are engaging with administration to try to mitigate impact to patient care. Our focus has been on GMPD [global medical products and distribution] — given the other four operating segments representing 95% of our segment profit are largely unaffected by the announcements to date — and we anticipate their robust business models will continue to minimize ongoing impacts. Within GMPD, we have been proactive and aggressive in implementing mitigation actions to reduce the burden on our customers as much as possible.
“This includes increasing U.S. manufacturing capacity in key categories such as syringes and incontinence; diversifying our supplier network away from higher-risk jurisdictions; identifying and onboarding alternate sources of supply, including in some cases pre-stocking inventory; deploying AI [artificial intelligence] in support of our tariff planning and compliance; and further reducing our internal cost structure. Only after aggressive mitigation actions like these are accomplished do we consider price adjustments. So far, these actions and others have helped us already mitigate several hundred million dollars of exposure.”
Despite those efforts, Hollar said, “based on today’s tariffs, we would still anticipate roughly $200 million to $300 million of remaining gross tariff costs in fiscal 2026 before further mitigation. We anticipate mitigating the majority of these costs through continued operational actions and price adjustments, which we are already working on with our customers.”
Aaron Alt, the company’s chief financial officer, said later in the call, “Overall, the largest and highest growth parts of our business are resilient and well positioned to continue growth in fiscal year 2026, and we are confident in the enterprise achieving double-digit non-GAAP [generally accepted accounting principles] EPS [earnings per share] growth next year. Our team is steadfast on pursuing operational execution while investing for long-term growth.”
An update on at-Home Solutions
Regarding Cardinal Health at-Home Solutions’ segment, “We are delivering on our clear strategy to win in this rapidly growing part of the industry,” Hollar said. “We continue to invest in automation to bolster the productivity, quality and safety of our supply chain, which has been a driver in our all-time high operational metrics.”
Hollar credited Cardinal Health’s acquisition of Advanced Diabetes Supply Group as part of the reason the at-Home division is “on an extremely solid foundation” and said the ongoing integration of ADSG “in its early weeks is tracking as planned. We continue to expect the synergistic combination of ADSG and at-Home solutions to create value for patients and enable us to grow profitably as the overall diabetes care market expands well into the future.”
Raising full-year EPS guidance
Alt reported that Cardinal Health “grew operating earnings by 21% and EPS by 13% even while comparing against the prior period to the customer contract expiration and while executing and integrating our recent acquisitions. The outstanding performance of pharma, up 14%, anchored our earnings results with further momentum provided by all three of the other growth businesses, together up 22% and continued profit growth in GMPD.”
Alt added that earnings per share for the quarter were $2.35: “As a result, we are raising and narrowing our full-year EPS guidance to a range of $8.05 to $8.15.”
For Q3, total company revenue “was flat at nearly $55 billion on a reported basis,” Alt said. “Adjusting for the contract expiration, revenue increased 19% versus the prior year with strong demand across pharma and all three of the growth businesses.”
The CFO said GLP-1 sales accounted for approximately seven percentage points of revenue growth for the pharmaceutical segment. The at-Home Solutions segment had 12% revenue growth.
“The addition of ADSG to at-Home Solutions will be accretive to our business as we work to quickly unlock deal synergies,” Alt said.
“Stepping back, there is a lot to be excited about with our results this quarter,” Hollar said. “Not only did we see earnings growth in each of our five operating segments, but we also saw significant growth in our high-priority growth areas: specialty, nuclear, at-Home Solutions and OptiFreight. We have more work to do at GMPD, but I am pleased with the operational improvements we have achieved even in a more uncertain macro-economic environment.”
