Cardinal Health ( CAH - Analyst Report ) is slated to report fourth quarter and fiscal 2012 results on Thursday, August 2. The current Zacks Consensus Estimate for the fourth quarter is 72 cents, representing an estimated 22.5% year-over-year hike.

Third Quarter Recap

Cardinal Health posted fiscal third-quarter 2012 (ended March 31) adjusted (excluding one-time charges and gains) earnings per share from continuing operations of 94 cents, beating the Zacks Consensus Estimate of 88 cents and the year-ago earnings of 81 cents per share.

Earnings from continuing operations (as reported) were up about 33% year over year to $332.5 million (or 95 cents a share).

Total revenues were $26.9 billion in the quarter, up about 3% year over year, beating the Zacks Consensus Estimate of $26.6 billion.

The Pharmaceutical segment reported revenues of $24.5 billion, up approximately 3% year over year. Revenues from the Medical segment were $2.4 billion in the third quarter, up 8%, due to higher sales to pre-existing clients.

Estimate Revision Trend

Agreement

Estimates for the fiscal fourth quarter have been stagnant. Out of a total of 11 analysts covering the stock, there were no revisions in the prior week and past month.

With regard to estimates for fiscal 2012, no analysts (out of 12) raised or lowered his/her estimate over the past week and prior month. The current Zacks Consensus Estimate for fiscal 2012 is $3.20, representing an estimated 19.9% year-over-year increase.

Magnitude

The magnitude of estimate revision for the fourth quarter, as well as fiscal 2012, has been static over the prior week as well as the past month.

Cardinal has generated positive surprises in each of the previous four quarters and we believe the same trend may continue. The company produced an average positive earnings surprise of 4.1% over the preceding four quarters, meaning that it beat the Zacks Consensus Estimate by that measure.

Our Take

Cardinal Health is ranked in the Fortune 500. With over $100 billion in annual sales, Cardinal Health remains one of the largest distributors of pharmaceuticals and medical supplies in the U.S., with a diversified product portfolio, which may partly insulate it from the current economic uncertainty.

The company stands to gain from the gradual shift in mix from the bulk to the higher-margin non-bulk sector of the Pharmaceutical segment. It is also riding the generic wave. Overall, Cardinal is benefiting from a spate of tuck-in acquisitions and capital deployment strategies.

However, the company faces tough competition across all its business segments, which may continue to pressure pricing and margins. Its major competitors in the pharmaceutical supply chain segment include McKesson Corp. ( MCK - Analyst Report ) and AmerisourceBergen Corp. ( ABC - Analyst Report ) . We currently have a long-term Neutral rating on Cardinal. The stock currently retains a Zacks #3 Rank, which translates into a short-term Hold recommendation.