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Cardinal Health (CAH) to Post Q4 Earnings: What's in Store?

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Cardinal Health, Inc. (CAH - Free Report) is scheduled to report fourth-quarter fiscal 2020 results on Aug 6, before the opening bell.

In the last reported quarter, the company delivered earnings surprise of 13.3%. It beat estimates in each of the trailing four quarters, the average surprise being 18.7%.

Q4 Estimates

For the fiscal fourth quarter, the Zacks Consensus Estimate for earnings is pegged at 88 cents per share, indicating a decline 20.7% from the prior-year quarter. The same for revenues stands at $37.06 billion, suggesting a decrease of 0.8% from the year-ago reported figure.

Factors to Note

Cardinal Health’s Pharmaceutical segment is the second largest pharmaceutical distributor in the United States. It is to be noted here that the COVID-19 pandemic had a greater impact in the to-be-reported quarter compared to the fiscal third quarter, which witnessed a partial impact of the same.

This is likely to have weighed on sales from pharmaceutical distribution and specialty solutions customers, which in turn might get reflected in the Pharmaceutical segment’s fiscal fourth-quarter results.

In fact, the company anticipates a substantial net negative impact on this segment’s performance in the fiscal fourth quarter primarily due to decline in volume associated with the cancellation or deferral of elective medical procedures.

Cardinal Health, Inc. Price and EPS Surprise

Cardinal Health, Inc. Price and EPS Surprise

Cardinal Health, Inc. price-eps-surprise | Cardinal Health, Inc. Quote

Notably, for the fiscal fourth-quarter, the Zacks Consensus Estimate for the unit’s revenues stands at $33.24 billion, suggesting a decline of 0.5% from the year-ago quarter.

Nonetheless, Cardinal Health’s Medical unit may have contributed significantly to the overall fiscal fourth-quarter performance. In fact, the segment manufactures products such as single-use surgical drapes, gowns and apparel, exam and surgical gloves, which may have benefited sales in the to-be-reported quarter. The fiscal fourth-quarter performance is likely to reflect growth in Cardinal Health at Home.

Moreover, the company has been committed toward improving efficiencies across its Medical segment by refining commercial, operational and data capabilities. We anticipate these to get reflected in the fiscal fourth-quarter results.

The company is likely to have benefited from its cost savings initiative related to actions intended to optimize and simplify the company's operating model and cost structure. This, in turn, might have aided the company’s margins in the to-be-reported quarter.

Further, the Cardinal Health’s diversified product portfolio is likely to have contributed to the fiscal fourth-quarter performance.

However, stiff competition in each of the company’s business segments may have weighed on the segment margins and consequently, might impede profitability in the fiscal fourth quarter.

Here’s What the Quantitative Model Suggests

Per our proven model, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. This is not the case here.

Earnings ESP: Cardinal Health has an Earnings ESP of -5.30%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: The company carries a Zacks Rank #4 (Sell).

Stocks Worth a Look

Here are some medical stocks worth considering as these have the right combination of elements to post an earnings beat this quarter.

Integra LifeSciences Holdings Corporation (IART - Free Report) has an Earnings ESP of +20.69% and a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

GW Pharmaceuticals plc (GWPH - Free Report) has an Earnings ESP of +17.38% and a Zacks Rank of 3.

Nevro Corp. (NVRO - Free Report) has an Earnings ESP of +15.17% and a Zacks Rank of 3.

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