Leading distributor of pharmaceutical and medical supplies, Cardinal Health, Inc. (CAH - Analyst Report) recently revealed that it has 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. The distribution facilities and stores to be served under the latest agreement remain similar to those served under the previous setup.
According to the company, CVS Caremark is a long standing and important partner. Cardinal Health plans to engage with CVS Caremark to generate value in a dynamic health care environment.
Cardinal Health is ranked among the Fortune 500 companies. With about $100 billion in annual sales, the company 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 economic fluctuations.
Cardinal Health stands to gain from the gradual shift in mix from bulk to the higher margin non-bulk sector of the Pharmaceutical segment. Its mainstay Pharmaceutical segment is heavily influenced by the generic wave. Overall, Cardinal Health is benefiting from a spate of tuck-in acquisitions and capital deployment strategies. The company continues to deploy capital to boost investor confidence via share repurchases and dividend hikes. However, Cardinal Health faces tough competition across all its business segments, which may continue to pressure pricing and margins.
Cardinal Health currently carries a Zacks Rank #3 (Hold). Rite Aid Corporation (RAD - Analyst Report) and GNC Holdings Inc. (GNC - Snapshot Report) both carry a Zacks Rank #2 (Buy) and are expected to do well.