Cardinal Health

Company Description

Cardinal Health is one of the largest distributors of pharmaceuticals and medical supplies. The company is also a leading provider of products and services that improve the safety and productivity of health-care providers. Cardinal Health manufactures medication infusion and dispensing products, respiratory equipment, and surgical instruments.

Stable Business with Growth Potential

The company's diversified product portfolio generates a steady revenue stream even during economic downturns.

Cardinal's generic business should remain its fastest growing segment. The company has been expanding relationships with generic manufacturers. These relationships have several benefits including higher levels of service, greater clarity on costs, and more consistent product supply with fewer disruptions. Cardinal management expects its generic business to gain momentum in fiscal 2011 and 2012.

The company uses its cash flow to finance its growth-by-acquisition strategy. Cardinal has historically targeted smaller companies that can rolled up into its existing operations. These roll-up acquisitions help reduce costs associated with internal developments and boost the company's overall growth rates.

Recent Results

On January 28, Cardinal Health reported fiscal second-quarter results. Total sales increased 3% year-over-year to $24.9 billion. The company reported earnings per share of $0.57, which was 6 cents above the Zacks Consensus Estimate of $0.51.

Cardinal management also increased its earnings guidance for fiscal year 2010. The company expects to earn $2.08 to $2.18 per share, significantly above its previous guidance of $1.90 to $2.00.

In addition, the stock has a current dividend yield of 2.1%. The health-care distributor will pay a regular quarterly dividend of 17.5 cents per share on April 15 to shareholders of record on April 1.

Cardinal Heath is scheduled to release fiscal third quarter 2010 earnings results on April 22.

Estimates Are Moving Higher

Cardinal Health has beaten the Zacks Consensus Estimate by an average of 24.75% in the last two quarters. After management raised its outlook for fiscal year 2010, analysts covering CAH shares lifted their estimates for the next two fiscal years. In the last month, the Zacks Consensus Estimate for fiscal year 2010 went from $2.02 to $2.18, while the fiscal 2011 estimate went from $2.22 to $2.38.

Read the full analyst report on CAH