Leading distributor of pharmaceuticals and medical supplies Cardinal Health (CAH - Analyst Report) recently announced a new share repurchase program to buy back up to $750 million worth of its common stock.
The stock buyback is effective immediately and expires on August 31, 2015. This share repurchase authorization program replaces the previous $750 million buyback program approved in November 2010, of which $200 million remained.
Cardinal’s board of directors also approved a cash dividend of $0.2375 a share payable to its shareholders on October 15, 2012. This announcement marks the 112th successive regular quarterly dividend.
The share repurchase program will reduce the number of shares outstanding, which stood at 349 million as of June 30, 2012. Exiting fiscal 2012, the company had cash and equivalents of about $2.3 billion.
The buying back of shares underlines Cardinal’s strategy to increase shareholder value in the long run. The announcement is not only expected to reinforce shareholders’ confidence but also boost the market value of the outstanding shares.
Cardinal Health is ranked among Fortune 500 companies. 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 bulk to the higher-margin non-bulk sector of the Pharmaceutical segment. It is also riding the generic wave. Overall, Cardinal benefits from a spate of tuck-in acquisitions and capital deployment strategies.
However, the company faces tough competition across all 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 recommendation on Cardinal. The stock currently retains a Zacks #3 Rank, which translates into a short-term Hold rating.