In the after-market session on Monday, Cardinal Health, Inc. (NYSE: CAH) shares displayed a noteworthy reversal of their decline from the regular session. Experiencing a 3.06% uptick to $105.98, they countered the earlier 4.95% dip, settling at $102.83. An announcement of a business update and the termination of CAH's relationship with a major pharmaceutical distributor precipitated this fluctuation in CAH's stock value.
It has been announced by Cardinal Health (CAH) that the pharmaceutical distribution contracts with OptumRx will expire in June 2024, and that they will not be renewed. In spite of this development, the company forecasted non-GAAP diluted EPS between $7.20 and $7.35 for fiscal 2024.
In addition to this, Cardinal Health reaffirmed its long-term profit Compound Annual Growth Rate (CAGR) targets for Pharmaceuticals and Specialty Solutions of 4% to 6%, as well as a 12% to 14% non-GAAP EPS CAGR target for fiscal years 2024 to 2026, based on fiscal 2023.
The company's dedication to steady, long-term growth and the generation of wealth for its stakeholders is emphasized by this confirmation. Although the financial projection for the fiscal year 2025 has not yet been released, Cardinal Health expects both segment profit and non-GAAP diluted EPS to increase in that year.
Mitigating the impact of the OptumRx contract expiration will involve securing new clientele, fostering specialty growth, and implementing strategic initiatives. In fiscal year 2023, sales to OptumRx accounted for 16% of Cardinal Health's consolidated revenue, predominantly comprising non-specialty bulk shipments to Optum's mail dispensing facilities.
Notably, sales to OptumRx yield a substantially lower operating margin compared to the overall Pharmaceutical and Specialty Solutions segment. Moreover, Cardinal Health anticipates an average adjusted free cash flow of approximately $2 billion from fiscal 2024 to 2026, albeit with a projected decrease in fiscal 2025 due to the OptumRx contract's unwinding and timing factors.
Emphasizing its commitment to continued profitable growth in fiscal 2025, Cardinal Health remains steadfast in executing its strategic agenda for customer-centric operations. This entails capitalizing on various market opportunities, including the acquisition of new customers and leveraging enhanced capabilities resulting from the integration of Specialty Networks in fiscal 2025.