Back to top

Image: Bigstock

Here's Why You Should Retain Cardinal Health (CAH) Stock Now

Read MoreHide Full Article

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, segmental weakness remains a concern.

The stock has gained 2.4% compared with the industry’s growth of 1.3% in the past month. Further, the S&P 500 Index has rallied 2.2% in the same time frame.

The company — with a market capitalization of $16.65 billion — is a nation-wide drug distributor and provider of services to pharmacies, healthcare providers and manufacturers. It anticipates earnings to improve 7.5% over the next five years. Moreover, Cardinal Health beat estimates in each of the trailing four quarters, the average surprise being 15.9%.

Zacks Investment ResearchImage Source: Zacks Investment Research

Let’s take a closer look at the factors that substantiate the company’s Zacks Rank #3 (Hold).

What’s Weighing on the Stock?

In the fiscal third-quarter 2021, Pharmaceutical segment witnessed a decline of 4.3% in profits to $511 million due to decrease in volume on account of the COVID-19 impact on the generics program. However, increase in contribution from brand sales mix partially offset the downside.

Medical segment profit fell 2.2% to $174 million, due to benefits from cost savings that include global manufacturing efficiencies.

What’s Driving the Performance?

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.

Notably during second-quarter fiscal 2021, the company collaborated with the CDC to act as a network administrator, thereby allowing retail independent, small chain and long-term care pharmacy customers to take part in the vaccination effort.

During the fiscal third quarter of 2021, the company was awarded a contract worth $57.8 million (which included options that if exercised by the U.S. Department of Health and Human Services – HHS – could reach $91.6 million) for the storage and distribution of 80,000 pallets of personal protective equipment (PPE) to lend support to the Strategic National Stockpile (SNS).

Per the fiscal second-quarter 2021 earnings call, the company is boosting its core Medical and Pharmaceutical Distribution and product capabilities as it continues to adapt the resilient business models for the future. Further, Cardinal Health continues to show solid progress in both its segments and supply chain work streams, and generating near and long-term efficiencies.

Which Way Are Estimates Headed?

For fiscal 2021, the Zacks Consensus Estimate for revenues is pegged at $160.42 billion, indicating an improvement of 4.9% from the previous year’s reported number. The same for adjusted earnings per share stands at $5.98, suggesting growth of 9.7% from the year-ago reported figure.

Stocks to Consider

Some better-ranked stocks from the broader medical space are Veeva Systems Inc. (VEEV - Free Report) , DaVita Inc. (DVA - Free Report) and Baxter International Inc. (BAX - Free Report) , each currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Veeva Systems’ long-term earnings growth rate is estimated at 15.8%.

DaVita’s long-term earnings growth rate is estimated at 14.4%.

Baxter International’s long-term earnings growth rate is projected at 9.3%.

Bitcoin, Like the Internet Itself, Could Change Everything

Blockchain and cryptocurrency has sparked one of the most exciting discussion topics of a generation. Some call it the “Internet of Money” and predict it could change the way money works forever. If true, it could do to banks what Netflix did to Blockbuster and Amazon did to Sears. Experts agree we’re still in the early stages of this technology, and as it grows, it will create several investing opportunities.

Zacks’ has just revealed 3 companies that can help investors capitalize on the explosive profit potential of Bitcoin and the other cryptocurrencies with significantly less volatility than buying them directly.

See 3 crypto-related stocks now >>