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On Jun 3, 2013, we retained Cardinal Health, Inc. (CAH - Analyst Report) at Neutral based on its fiscal third quarter 2013 earnings results.

Why the Retention?

Cardinal Health announced results for the reported quarter on May 2.  The company posted adjusted earnings per share from continuing operations of $1.20, thereby beating the Zacks Consensus Estimate of 95 cents as well as the year-ago earnings of 94 cents per share.

Revenues in the fiscal third quarter were $24,552 million, down 9% on a year-over-year basis, almost in line with the Zacks Consensus Estimate of $24,635 million.

While margins are thin in the bulk pharmaceutical business, the business mix is evolving in favor of the non-bulk segment. Cardinal Health’s generics business showed continued signs of strength.

For fiscal 2013, Cardinal raised its forecast for adjusted earnings per share from continuing operations to a band of $3.67 and $3.71 (from $3.42 to $3.50 earlier).

In late Apr 2013, Cardinal Health revealed that it inked a fresh agreement to provide pharmaceutical products to a chain of distribution facilities and retail pharmacies of CVS Caremark Corporation (CVS - Analyst Report) till the middle of 2016.

However, the company has recently lost two important clients, Walgreen Co. (WAG - Analyst Report) and Express Scripts Holding Company (ESRX - Analyst Report). Loss of contracts with Walgreens and Express Scripts has negatively impacted revenue. However, the smaller Medical segment is now in a stable condition.

The Zacks Consensus Estimate for fiscal 2013 has moved up by 12 cents (3.4%) to $3.62 over the last 60 days. The Zacks Consensus Estimate for 2014 has moved down by 2 cents (0.6%) over the same timeframe. The stock carries a Zacks Rank #3 (Hold).

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