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Here's Why You Should Hold Onto Cardinal Health Stock Now
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With a market capitalization of approximately $15.16 billion, Cardinal Health, Inc’s (CAH - Free Report) Medical and Pharmaceutical offerings lend the company with a competitive edge in the MedTech space. The company offers industry expertise and a solid portfolio of safe medical products like Bathroom Safety, Mobility, and Exam Room Equipment products. However, the company has been facing sluggishness in the exam-gloves unit lately. Further, cutthroat competition in the niche space is a headwind.
For 2018, the Zacks Consensus Estimate for revenues is pegged at $135.97billion. The same for adjusted earnings for 2018 is pegged at $4.92 per share, reflecting a decline of8.9%. The stock has a Zacks Rank #3 (Hold).
Here we take a quick look at the primary factors that have been plaguing Cardinal Health and discuss the prospects that ensure near-term recovery.
What's Deterring Cardinal Health?
Issues in Medical-Gloves Unit
In the third quarter of fiscal 2018, commodity pricing and supply disruptions have created headwinds in the medical gloves including surgical gloves, exam gloves and clean-room gloves segment. For fiscal 2018, lower expectations for the Medical segment due to headwinds in the exam-gloves segment are concerns. However, the company’s sourcing and commercial teams are pursuing several projects to minimize the impact from these dynamics.
Cordis Unit Lacks Luster
By the end of the third quarter of fiscal 2018, things have not been very bright for Cardinal Health, especially in the Cordis unit. Sluggish performance in the segment reduced the company’s adjusted operating earnings and created a higher-than-expected adjusted effective tax rate (19 cents per share). Out of this, Cordis-related increased tax-rate was 13 cents per share.
Taking this into consideration, Cardinal Health expects a very challenging time ahead in fiscal 2019.
Why Should You Still Hold?
Cushioned Against Macroeconomic Sluggishness
Large-cap, diversified healthcare distributors like Cardinal Health are relatively insulated from macro economic uncertainty and a weak economy. The company is one of the largest distributors of pharmaceuticals and medical supplies. It has a diverse portfolio, which is a hedge against the risk of sales shortfall in dire times.
The company’s generics business continues to show healthy growth, supported by a solid customer base, significant scale of operation and the competence to source products from a complex and global supply network. Cardinal Health has rationalized the number of generic suppliers.
By the end of third-quarter fiscal 2018, management confirmed that generic market pricing continues to trend as expected and Red Oak Sourcing — Cardinal Health’s joint venture with CVS Health to source generics —continues to perform and deliver better-than-planned results on the cost side.
Cardinal Health’s ECG Monitoring Electrodes offer quality performance and are neoprene-free, lead-free and mercury-free. These are not made with natural rubber latex and are highly exclusive in the markets.
The company offers a full baby product line, which includes Baby Shampoo & Body Wash, Baby Lotion, Baby Powder, Baby Oil and more.
Recently, Cardinal Health announced the receipt of FDA’s approval of its innovative drug-eluting stent for the treatment of patients with narrowing or blockages to their coronary arteries. In January 2018, the first commercial cases using the stent in the United States were implanted successfully.
Price Performance
Shares of Cardinal Health have underperformed the industry in a month’s time. Notably, the company’s shares have lost 8.5% against the industry's rise of 0.4%. The current level is also lower than S&P 500 index's increase of 3.2%.
Key Picks
A few better-ranked stocks in the broader medical space are Genomic Health , Abiomed and Stryker Corporation (SYK - Free Report) .
Abiomed has a projected long-term earnings growth rate of 27%. The stock sports a Zacks Rank #1.
Stryker has a projected long-term earnings growth rate of 9.7%. The stock carries a Zacks Rank #2 (Buy).
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Image: Bigstock
Here's Why You Should Hold Onto Cardinal Health Stock Now
With a market capitalization of approximately $15.16 billion, Cardinal Health, Inc’s (CAH - Free Report) Medical and Pharmaceutical offerings lend the company with a competitive edge in the MedTech space. The company offers industry expertise and a solid portfolio of safe medical products like Bathroom Safety, Mobility, and Exam Room Equipment products. However, the company has been facing sluggishness in the exam-gloves unit lately. Further, cutthroat competition in the niche space is a headwind.
For 2018, the Zacks Consensus Estimate for revenues is pegged at $135.97billion. The same for adjusted earnings for 2018 is pegged at $4.92 per share, reflecting a decline of8.9%. The stock has a Zacks Rank #3 (Hold).
Here we take a quick look at the primary factors that have been plaguing Cardinal Health and discuss the prospects that ensure near-term recovery.
What's Deterring Cardinal Health?
Issues in Medical-Gloves Unit
In the third quarter of fiscal 2018, commodity pricing and supply disruptions have created headwinds in the medical gloves including surgical gloves, exam gloves and clean-room gloves segment. For fiscal 2018, lower expectations for the Medical segment due to headwinds in the exam-gloves segment are concerns. However, the company’s sourcing and commercial teams are pursuing several projects to minimize the impact from these dynamics.
Cordis Unit Lacks Luster
By the end of the third quarter of fiscal 2018, things have not been very bright for Cardinal Health, especially in the Cordis unit. Sluggish performance in the segment reduced the company’s adjusted operating earnings and created a higher-than-expected adjusted effective tax rate (19 cents per share). Out of this, Cordis-related increased tax-rate was 13 cents per share.
Taking this into consideration, Cardinal Health expects a very challenging time ahead in fiscal 2019.
Why Should You Still Hold?
Cushioned Against Macroeconomic Sluggishness
Large-cap, diversified healthcare distributors like Cardinal Health are relatively insulated from macro economic uncertainty and a weak economy. The company is one of the largest distributors of pharmaceuticals and medical supplies. It has a diverse portfolio, which is a hedge against the risk of sales shortfall in dire times.
The company’s generics business continues to show healthy growth, supported by a solid customer base, significant scale of operation and the competence to source products from a complex and global supply network. Cardinal Health has rationalized the number of generic suppliers.
By the end of third-quarter fiscal 2018, management confirmed that generic market pricing continues to trend as expected and Red Oak Sourcing — Cardinal Health’s joint venture with CVS Health to source generics —continues to perform and deliver better-than-planned results on the cost side.
Cardinal Health, Inc. Price and Consensus
Cardinal Health, Inc. Price and Consensus | Cardinal Health, Inc. Quote
Diversified Product Portfolio
Cardinal Health’s ECG Monitoring Electrodes offer quality performance and are neoprene-free, lead-free and mercury-free. These are not made with natural rubber latex and are highly exclusive in the markets.
The company offers a full baby product line, which includes Baby Shampoo & Body Wash, Baby Lotion, Baby Powder, Baby Oil and more.
Recently, Cardinal Health announced the receipt of FDA’s approval of its innovative drug-eluting stent for the treatment of patients with narrowing or blockages to their coronary arteries. In January 2018, the first commercial cases using the stent in the United States were implanted successfully.
Price Performance
Shares of Cardinal Health have underperformed the industry in a month’s time. Notably, the company’s shares have lost 8.5% against the industry's rise of 0.4%. The current level is also lower than S&P 500 index's increase of 3.2%.
Key Picks
A few better-ranked stocks in the broader medical space are Genomic Health , Abiomed and Stryker Corporation (SYK - Free Report) .
Genomic Health has an expected earnings growth rate of 187.5% for the current quarter. The stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Abiomed has a projected long-term earnings growth rate of 27%. The stock sports a Zacks Rank #1.
Stryker has a projected long-term earnings growth rate of 9.7%. The stock carries a Zacks Rank #2 (Buy).
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot trades we're targeting>>