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Cardinal Health Upped to Outperform

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On Oct 4, we have upgraded our recommendation on Cardinal Health, Inc. (CAH - Free Report) to Outperform from Neutral following its earnings and revenues beats in the fourth quarter of fiscal 2013. This nation-wide drug distributor and provider of services to pharmacies, healthcare providers and manufacturers became a Zacks Rank #1 (Strong Buy) stock shortly after reporting fourth quarter results.

Why Upgraded?

On Aug 1, Cardinal Health Inc. posted adjusted earnings per share of 79 cents for fiscal 2013-fourth quarter, surpassing the year-ago earnings by 8% and the Zacks Consensus Estimate of 77 cents by 2.6%. Adjusted earnings per share of $3.73 for fiscal 2013 also rose 16% from $3.21 a year ago, reflecting a beat of 5.7% over the Zacks Consensus Estimate of $3.53.

Revenues in the quarter went down 5% to $25,420 million, due to lower revenues from the Pharmaceutical segment. Nonetheless, the top line beat the Zacks Consensus Estimate of $24,506 million. Similarly, for the fiscal year, revenues declined 6% to $101,093 million but exceeded the Zacks Consensus Estimate of $100,237 million.

Following the release of fourth quarter results, the Zacks Consensus Estimate for 2014 earnings went up by a penny to $3.57 per share. However, the Zacks Consensus Estimate for 2015 earnings remained unchanged at $3.96 per share.

Apart from strong fourth quarter results, Cardinal Health’s growth outlook looks impressive. The company is relatively insulated from macro economic uncertainty and a weak economy being one of the largest distributors of pharmaceuticals and medical supplies.

Further, CAH’s generics business shows continuing signs of strength. Growth in this business continues to surpass the market growth rate, especially the company’s Source program.

Other Stocks to Look For

Apart from CAH, other medical supplies stocks that are currently performing well include STRAUMANN HLD N AKT with a Zacks Rank #1 (Strong Buy), and Align Technology Inc. (ALGN - Free Report) and Bio-Reference Laboratories Inc. , both with a Zacks Rank #2 (Buy).

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