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We expect drug distributor Cardinal Health Inc. (CAH - Analyst Report) to beat expectations when it reports fiscal 2014-fourth quarter results on Aug 4, before the opening bell.

Why a Likely Positive Surprise?

Our proven model shows that Cardinal Health is likely to beat earnings because it has the right combination of two key ingredients.

Positive Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is at 1.24%. This is very meaningful and a leading indicator of a likely positive earnings surprise for shares.

Zacks  Rank #3 (Hold): Note that stocks with Zacks Ranks of #1, #2 and #3 have a significantly higher chance of beating earnings. The Sell-rated stocks (#4 and #5) should never be considered going into an earnings announcement.  

The combination of Cardinal Health’s Zacks Rank #3 (Hold) and 1.24% ESP makes us very confident in looking for a positive earnings beat on Aug 4.

What is Driving the Better than Expected Earnings?

Cardinal Health is one of the largest distributors of pharmaceuticals and medical supplies. Large-cap, diversified healthcare distributors such as Cardinal Health are relatively insulated from macro-economic uncertainty and a weak economy. It has a diversified product portfolio, which is a hedge against the risk of sales shortfall in testing times.

For fiscal 2014, Cardinal Health reaffirmed its forecast for adjusted earnings per share in the band of $3.75 to $3.85, indicating a 0.5 to 3.2% over the prior fiscal year. The current Zacks Consensus Estimate of $3.82 for the year lies within the guided range.

Other Stocks to Consider

Here are some other companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:  

Medtronic, Inc. (MDT - Analyst Report), Earnings ESP of 1.09% and a Zacks Rank #2 (Buy).

Opko Health, Inc. (OPK - Snapshot Report), Earnings ESP of 11.11% and a Zacks Rank #3 (Hold).

Wright Medical Group Inc. (WMGI - Analyst Report), Earnings ESP of 2.22% and a Zacks Rank #2 (Buy).

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