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Here's Why You Should Retain Cardinal Health (CAH) Stock Now
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Cardinal Health Inc. (CAH - Free Report) is well-poised for growth on the back of a diversified product portfolio, acquisition-driven strategy and robust pharmaceutical segment. However, higher procurement costs remain a concern.
The stock has gained 6.8% compared with the industry’s growth of 16% in the past month. Further, the S&P 500 Index has rallied 16.3% in the same time frame.
The company — with a market capitalization of $15.59 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, the average surprise being 21.4%.
Let’s take a closer look at the factors that substantiate the company’s Zacks Rank #3 (Hold).
What’s Weighing on the Stock?
Per the fiscal first-quarter 2021 earnings call, Cardinal Health still continues to incur substantially higher procurement costs for several personal protective equipment (PPE) product categories due to global supply challenges amid the pandemic. To help counter these cost increases, the company implemented price increases on select PPE products with the goal of maintaining neutral margin dollars.
Key Catalysts
Cardinal Health’s Medical and Pharmaceutical offerings provide it 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, and nuclear and pharmacy offerings. The segment’s strength is anticipated to drive its performance in the days ahead.
In first-quarter fiscal 2021, pharmaceutical revenues rose 5% to $35.11 billion on a year-over-year basis. The upside can be attributed to growth in sales from Pharmaceutical Distribution and Specialty Solutions customers. Despite decline in volumes related to COVID-19, the segment witnessed an increase of 1% in profits to $402 million, driven by an increase in contribution from brand sales mix.
For fiscal 2021, the company expects the Pharmaceutical segment to witness a mid-single-digit percentage improvement in revenues and low-single-digit percentage growth with respect to profit. Higher contributions from key growth areas — Specialty and Connected Care — and sustained market dynamics within its generics program are anticipated to drive the segment.
Which Way Are Estimates Headed?
For fiscal 2021, the Zacks Consensus Estimate for revenues is pegged at $160.72 billion, indicating an improvement of 5.1% from the previous year’s reported number. The same for adjusted earnings per share stands at $5.83, suggesting growth of 6.9% from the year-ago reported figure.
Merit Medical has a projected long-term earnings growth rate of 12.6%.
Patterson Companies has an estimated long-term earnings growth rate of 9.6%.
IDEXX Laboratories has a projected long-term earnings growth rate of 15.8%.
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Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Our recent biotech recommendations have produced gains of +50%, +83% and +164% in as little as 2 months. The stocks in this report could perform even better.
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Here's Why You Should Retain Cardinal Health (CAH) Stock Now
Cardinal Health Inc. (CAH - Free Report) is well-poised for growth on the back of a diversified product portfolio, acquisition-driven strategy and robust pharmaceutical segment. However, higher procurement costs remain a concern.
The stock has gained 6.8% compared with the industry’s growth of 16% in the past month. Further, the S&P 500 Index has rallied 16.3% in the same time frame.
The company — with a market capitalization of $15.59 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, the average surprise being 21.4%.
Let’s take a closer look at the factors that substantiate the company’s Zacks Rank #3 (Hold).
What’s Weighing on the Stock?
Per the fiscal first-quarter 2021 earnings call, Cardinal Health still continues to incur substantially higher procurement costs for several personal protective equipment (PPE) product categories due to global supply challenges amid the pandemic. To help counter these cost increases, the company implemented price increases on select PPE products with the goal of maintaining neutral margin dollars.
Key Catalysts
Cardinal Health’s Medical and Pharmaceutical offerings provide it 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, and nuclear and pharmacy offerings. The segment’s strength is anticipated to drive its performance in the days ahead.
In first-quarter fiscal 2021, pharmaceutical revenues rose 5% to $35.11 billion on a year-over-year basis. The upside can be attributed to growth in sales from Pharmaceutical Distribution and Specialty Solutions customers. Despite decline in volumes related to COVID-19, the segment witnessed an increase of 1% in profits to $402 million, driven by an increase in contribution from brand sales mix.
For fiscal 2021, the company expects the Pharmaceutical segment to witness a mid-single-digit percentage improvement in revenues and low-single-digit percentage growth with respect to profit. Higher contributions from key growth areas — Specialty and Connected Care — and sustained market dynamics within its generics program are anticipated to drive the segment.
Which Way Are Estimates Headed?
For fiscal 2021, the Zacks Consensus Estimate for revenues is pegged at $160.72 billion, indicating an improvement of 5.1% from the previous year’s reported number. The same for adjusted earnings per share stands at $5.83, suggesting growth of 6.9% from the year-ago reported figure.
Stocks to Consider
Some better-ranked stocks from the broader medical space are Merit Medical Systems, Inc. (MMSI - Free Report) , Patterson Companies, Inc. (PDCO - Free Report) and IDEXX Laboratories, Inc. (IDXX - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Merit Medical has a projected long-term earnings growth rate of 12.6%.
Patterson Companies has an estimated long-term earnings growth rate of 9.6%.
IDEXX Laboratories has a projected long-term earnings growth rate of 15.8%.
Breakout Biotech Stocks with Triple-Digit Profit Potential
The biotech sector is projected to surge beyond $775 billion by 2024 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases.
Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Our recent biotech recommendations have produced gains of +50%, +83% and +164% in as little as 2 months. The stocks in this report could perform even better.
See these 7 breakthrough stocks now>>