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Here's Why You Should Retain Cardinal Health Stock for Now
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Cardinal Health Inc. (CAH - Free Report) is well poised for growth on the back of diversified product portfolio, acquisition-driven strategy and robust pharmaceutical segment. However, intense competition remains a concern.
The stock has gained 1.5% compared with the industry’s rise of 11% in a year’s time. Further, the S&P 500 Index has rallied 14.1% in the same time frame.
The company — with a market capitalization of $13.58 billion — is a nation-wide drug distributor and provider of services to pharmacies, healthcare providers and manufacturers. It anticipates earnings to improve 5.4% over the next five years. Moreover, Cardinal Health beat estimates in each of the trailing four quarters, with the average surprise being 17.4%.
Let’s take a closer look at the factors that substantiate the company’s Zacks Rank #3 (Hold).
What’s Deterring the Stock?
Cardinal Health faces tough competition in each of its business segments, which remains a concern.
Key Catalysts
Cardinal Health’s Medical and Pharmaceutical offerings provide the company with a competitive edge in the niche space. It offers industry expertise through an expanding portfolio of safe products.
The company follows an acquisition-driven strategy and remains committed toward investment in key growth businesses to gain market traction and bolster profits.
Cardinal Health’s Pharmaceutical segment is the second-largest pharmaceutical distributor in the United States. The segment’s products and services comprise pharmaceutical distribution, manufacturer and specialty solutions, along with nuclear and pharmacy offerings. The segment’s strength is anticipated to drive its performance in the days ahead.
For fiscal 2021, the company expects the Pharmaceutical segment to witness mid-single digit percentage improvement in revenues and low-single digit percentage growth with respect to profit. Higher contribution from key growth areas — Specialty and Connected Care — and sustained market dynamics within its generics program are anticipated to bolster the segment.
In fourth-quarter fiscal 2019 earnings call, Cardinal Health announced that it anticipates incremental cost savings of $130 million associated with actions intended to optimize, and simplify operating model as well as the cost structure. The company also exceeded enterprise cost savings target for fiscal 2020.
Which Way are Estimates Headed?
For fiscal 2021, the Zacks Consensus Estimate for revenues is pegged at $159.47 billion, indicating an improvement of 4.3% from the previous year. The same for adjusted earnings per share stands at $5.43, suggesting a dip of 0.4% from the year-ago reported figure.
Biolase has a projected long-term earnings growth rate of 15%.
Thermo Fisher has an estimated long-term earnings growth rate of 15%.
NextGen has a projected long-term earnings growth rate of 8%.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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Here's Why You Should Retain Cardinal Health Stock for Now
Cardinal Health Inc. (CAH - Free Report) is well poised for growth on the back of diversified product portfolio, acquisition-driven strategy and robust pharmaceutical segment. However, intense competition remains a concern.
The stock has gained 1.5% compared with the industry’s rise of 11% in a year’s time. Further, the S&P 500 Index has rallied 14.1% in the same time frame.
The company — with a market capitalization of $13.58 billion — is a nation-wide drug distributor and provider of services to pharmacies, healthcare providers and manufacturers. It anticipates earnings to improve 5.4% over the next five years. Moreover, Cardinal Health beat estimates in each of the trailing four quarters, with the average surprise being 17.4%.
Let’s take a closer look at the factors that substantiate the company’s Zacks Rank #3 (Hold).
What’s Deterring the Stock?
Cardinal Health faces tough competition in each of its business segments, which remains a concern.
Key Catalysts
Cardinal Health’s Medical and Pharmaceutical offerings provide the company with a competitive edge in the niche space. It offers industry expertise through an expanding portfolio of safe products.
The company follows an acquisition-driven strategy and remains committed toward investment in key growth businesses to gain market traction and bolster profits.
Cardinal Health’s Pharmaceutical segment is the second-largest pharmaceutical distributor in the United States. The segment’s products and services comprise pharmaceutical distribution, manufacturer and specialty solutions, along with nuclear and pharmacy offerings. The segment’s strength is anticipated to drive its performance in the days ahead.
For fiscal 2021, the company expects the Pharmaceutical segment to witness mid-single digit percentage improvement in revenues and low-single digit percentage growth with respect to profit. Higher contribution from key growth areas — Specialty and Connected Care — and sustained market dynamics within its generics program are anticipated to bolster the segment.
In fourth-quarter fiscal 2019 earnings call, Cardinal Health announced that it anticipates incremental cost savings of $130 million associated with actions intended to optimize, and simplify operating model as well as the cost structure. The company also exceeded enterprise cost savings target for fiscal 2020.
Which Way are Estimates Headed?
For fiscal 2021, the Zacks Consensus Estimate for revenues is pegged at $159.47 billion, indicating an improvement of 4.3% from the previous year. The same for adjusted earnings per share stands at $5.43, suggesting a dip of 0.4% from the year-ago reported figure.
Stocks to Consider
Some better-ranked stocks from the broader medical space include Biolase, Inc. (BIOL - Free Report) , Thermo Fisher Scientific Inc. (TMO - Free Report) and NextGen Healthcare, Inc. , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Biolase has a projected long-term earnings growth rate of 15%.
Thermo Fisher has an estimated long-term earnings growth rate of 15%.
NextGen has a projected long-term earnings growth rate of 8%.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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