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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 a robust pharmaceutical segment. However, margin contraction remains a concern.
Shares of this Zacks Rank #3 (Hold) have gained 24% on a year-to-date basis against the industry's decline of 2.1%. The S&P 500 Index has fallen 6.4% in the same time frame.
The company — with a market capitalization of $17.69 billion — is a nationwide drug distributor and provider of services to pharmacies, healthcare providers and manufacturers. It anticipates earnings to improve by 4.6% over the next five years. Cardinal Health's earnings yield is 8.4%, compared with the industry's 3.5%.
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 pursues an acquisition-driven strategy and remains committed to 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 expected to drive its performance in the days ahead.
Image Source: Zacks Investment Research
In the second quarter of fiscal 2022, pharmaceutical revenues amounted to $41.38 billion, up 11% on a year-over-year basis. The performance reflects branded pharmaceutical sales growth from Pharmaceutical Distribution and Specialty Solutions customers.
On the fiscal first-quarter 2022 earnings call, the company stated that it has been witnessing commercial momentum with Navista TS.
In November 2021, the company announced that its business — WaveMark Supply Management and Workflow Solutions — can now be implemented in clinical labs throughout the United States. Interestingly, WaveMark is among the first in the industry to improve clinical lab processes with the help of cutting-edge automation.
What's Weighing on the Stock?
In the second quarter of fiscal 2022, gross profit fell 9% year over year to $1.62 billion. As a percentage of revenues, gross margin in the reported quarter was 3.6%, down 70 basis points (bps) on a year-over-year basis.
With respect to the Medical segment, revenues fell 5% to $4.09 billion due to the divestiture of the Cordis business. The company reported a profit of $50 million in the Medical segment, which plunged 79% from the year-ago quarter, primarily due to inflationary impacts and global supply chain restrictions on products and distribution. The deterioration highlights the timing of selling higher-cost personal protective equipment (PPE), including the net positive impact in the prior year, and to a smaller extent, the divestiture of the Cordis business.
Estimates Trend
For fiscal 2022, the Zacks Consensus Estimate for revenues is pegged at $177.21 billion, indicating an improvement of 9.1% from the previous year's reported number.
The same for adjusted earnings per share stands at $5.27, suggesting a decline of 5.4% from the year-ago reported figure.
Stocks to Consider
Some better-ranked stocks from the broader medical space are AMN Healthcare Services, Inc. (AMN - Free Report) , Patterson Companies, Inc. (PDCO - Free Report) and Abiomed, Inc. .
AMN Healthcare's long-term earnings growth rate is estimated at 16.2%. AMN's earnings yield of 8.9% compares favorably with the industry's (0.3%).
Patterson Companies beat earnings estimates in three of the trailing four quarters and missed once, the average surprise being 2.7%. The company currently carries a Zacks Rank #2.
Patterson Companies' long-term earnings growth rate is estimated at 9.9%. PDCO's earnings yield of 6.3% compares favorably with the industry's 3.5%.
Abiomed surpassed earnings estimates in each of the trailing four quarters, the average surprise being 9.2%. The company currently carries a Zacks Rank #2.
Abiomed's long-term earnings growth rate is estimated at 20%. ABMD's earnings yield of 1.5% compares favorably against the industry's (6.4%).
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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 a robust pharmaceutical segment. However, margin contraction remains a concern.
Shares of this Zacks Rank #3 (Hold) have gained 24% on a year-to-date basis against the industry's decline of 2.1%. The S&P 500 Index has fallen 6.4% in the same time frame.
The company — with a market capitalization of $17.69 billion — is a nationwide drug distributor and provider of services to pharmacies, healthcare providers and manufacturers. It anticipates earnings to improve by 4.6% over the next five years. Cardinal Health's earnings yield is 8.4%, compared with the industry's 3.5%.
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 pursues an acquisition-driven strategy and remains committed to 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 expected to drive its performance in the days ahead.
Image Source: Zacks Investment Research
In the second quarter of fiscal 2022, pharmaceutical revenues amounted to $41.38 billion, up 11% on a year-over-year basis. The performance reflects branded pharmaceutical sales growth from Pharmaceutical Distribution and Specialty Solutions customers.
On the fiscal first-quarter 2022 earnings call, the company stated that it has been witnessing commercial momentum with Navista TS.
In November 2021, the company announced that its business — WaveMark Supply Management and Workflow Solutions — can now be implemented in clinical labs throughout the United States. Interestingly, WaveMark is among the first in the industry to improve clinical lab processes with the help of cutting-edge automation.
What's Weighing on the Stock?
In the second quarter of fiscal 2022, gross profit fell 9% year over year to $1.62 billion. As a percentage of revenues, gross margin in the reported quarter was 3.6%, down 70 basis points (bps) on a year-over-year basis.
With respect to the Medical segment, revenues fell 5% to $4.09 billion due to the divestiture of the Cordis business. The company reported a profit of $50 million in the Medical segment, which plunged 79% from the year-ago quarter, primarily due to inflationary impacts and global supply chain restrictions on products and distribution. The deterioration highlights the timing of selling higher-cost personal protective equipment (PPE), including the net positive impact in the prior year, and to a smaller extent, the divestiture of the Cordis business.
Estimates Trend
For fiscal 2022, the Zacks Consensus Estimate for revenues is pegged at $177.21 billion, indicating an improvement of 9.1% from the previous year's reported number.
The same for adjusted earnings per share stands at $5.27, suggesting a decline of 5.4% from the year-ago reported figure.
Stocks to Consider
Some better-ranked stocks from the broader medical space are AMN Healthcare Services, Inc. (AMN - Free Report) , Patterson Companies, Inc. (PDCO - Free Report) and Abiomed, Inc. .
AMN Healthcare surpassed earnings estimates in each of the trailing four quarters, the average surprise being 20%. The company currently sports a Zacks Rank of 2 (Buy). You can see the complete list of today's Zacks #1 (Strong Buy) Rank stocks here.
AMN Healthcare's long-term earnings growth rate is estimated at 16.2%. AMN's earnings yield of 8.9% compares favorably with the industry's (0.3%).
Patterson Companies beat earnings estimates in three of the trailing four quarters and missed once, the average surprise being 2.7%. The company currently carries a Zacks Rank #2.
Patterson Companies' long-term earnings growth rate is estimated at 9.9%. PDCO's earnings yield of 6.3% compares favorably with the industry's 3.5%.
Abiomed surpassed earnings estimates in each of the trailing four quarters, the average surprise being 9.2%. The company currently carries a Zacks Rank #2.
Abiomed's long-term earnings growth rate is estimated at 20%. ABMD's earnings yield of 1.5% compares favorably against the industry's (6.4%).