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Reasons to Retain Cardinal Health (CAH) in Your Portfolio
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Cardinal Health Inc. (CAH - Free Report) is well poised for growth, given its acquisition-driven strategy, a diversified product portfolio and a robust pharmaceutical segment. However, margin contraction remains a concern.
Shares of this Zacks Rank #3 (Hold) company have gained 5.4% in the past three months compared with the industry's 5.9% growth. The S&P 500 Index is up 5.9% in the same time frame.
CAH, with a market capitalization of $20.77 billion, is a nationwide drug distributor and service provider to pharmacies, healthcare providers and manufacturers. The company has an earnings yield of 6.7% compared with the industry's 4.5%. It anticipates earnings to improve 11.6% over the next five years.
Image Source: Zacks Investment Research
What's Driving the Performance?
Cardinal Health's Medical and Pharmaceutical offerings provide it with a competitive edge in its niche area of operations. It offers industry expertise through an expanding portfolio of safe and effective, pharmaceuticals and medical products.
In order to gain market traction and bolster profits, CAH pursues an acquisition-driven strategy and remains committed to investing in its key growth businesses.
The company's Pharmaceutical segment is the second-largest pharmaceutical distributor in the United States. Its products and services include pharmaceutical distribution, manufacturer and specialty solutions, and nuclear and pharmacy offerings. Cardinal Health is expected to draw strength from this segmentin the future.
In the second quarter of fiscal 2023, Pharmaceutical revenues were $47.7 billion, up 15% on a year-over-year basis. The performance suggests branded pharmaceutical sales growth from Pharmaceutical Distribution and Specialty Solutions customers.
On its fiscal second-quarter 2023 earnings call, Cardinal Health raised its earnings expectations. The company now expects adjusted earnings per share (EPS) between $5.20 and $5.50, up from the previous $5.05-$5.40 range.
Notable Developments
In March, CAH collaborated with Signify Health to offer in-home clinical and medication management services. The collaboration will initially focus on addressing interventions recommended for Medicare Advantage members of joint clients, and may expand into additional services (such as population health programs) and clinical interventions. The latest partnership is expected to significantly strengthen Cardinal Health's medication therapy management services.
In July 2022, the company acquired a smart platform for transferring prescriptions directly to patients through a secure mobile app — ScalaMed. The acquisition should have its digital connectivity, leading to higher patient satisfaction and greater medication adherence. It also has the potential to bring more patients to the system, thereby boosting Cardinal Health’s top line.
In the same month, Cardinal Health acquired the Bendcare group purchasing organization (CPO-GPO) entity to strengthen its specialty solutions business. The buyout is likely to expand the company’s distribution opportunities and technology solution offerings for specialty practices.
In June, Cardinal Health partnered with Zipline and began long-range drone deliveries in North Carolina. The partnership between the two companies is aimed at transforming patients’ experience while improving care delivery. It is also focused on mitigating the inventory stock-out risks and lessening the barriers for patients accessing necessary products, especially in difficult-to-reach areas.
During the same month, CAH expanded its warehouse footing by adding a new distribution center in Columbus, OH, to support its at-Home Solutions business. This move is likely to have boosted the company’s pharmaceutical distribution capability, one of the Pharmaceutical business’ services.
What's Weighing on the Stock?
In the second quarter of fiscal 2023, gross margin contracted 30 basis points year over year, suggesting rising costs. The inflationary pressure is likely to continue in the next few quarters.
In the Medical segment, revenues declined 7% to $3.8 billion due to the divestiture of the Cordis business. CAH continued to face inflationary impacts and global supply chain restrictions in terms of products and distribution. These macro headwinds are likely to continue for the rest of the financial year.
Estimates Trend
For fiscal 2023, the Zacks Consensus Estimate for revenues is pegged at $201.83 billion, indicating a 11.3% improvement from the previous year.
The same for adjusted EPS is $5.42, indicating a 7.1% increase from the year-ago reported number.
Some better-ranked stocks from the broader medical space are Becton, Dickinson and Company (BDX - Free Report) , Henry Schein (HSIC - Free Report) and The Cooper Companies (COO - Free Report) .
Becton, Dickinson and Company, carrying a Zacks Rank #2 (Buy) at present, has an estimated long-term growth of 7.8%. BDX’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 6.47%.
The company’s shares have gained 0.8% compared with the industry’s 5.9% growth in the past three months.
Henry Schein, sporting a Zacks Rank #1 at present, has an estimated long-term growth of 8.1%. HSIC’s earnings surpassed estimates in three of the trailing four quarters and met the same once, the average surprise being 2.97%.
The company’s shares have gained 2.6% compared with the industry’s 5.9% growth in the past three months.
The Cooper Companies, carrying a Zacks Rank #2 at present, has an estimated long-term growth of 11%. COO’s earnings missed estimates in three of the trailing four quarters and beat the same once, the average negative surprise being 1.82%.
The company’s shares have gained 10.1% compared with the industry’s 5.9% growth over the past three months.
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Reasons to Retain Cardinal Health (CAH) in Your Portfolio
Cardinal Health Inc. (CAH - Free Report) is well poised for growth, given its acquisition-driven strategy, a diversified product portfolio and a robust pharmaceutical segment. However, margin contraction remains a concern.
Shares of this Zacks Rank #3 (Hold) company have gained 5.4% in the past three months compared with the industry's 5.9% growth. The S&P 500 Index is up 5.9% in the same time frame.
CAH, with a market capitalization of $20.77 billion, is a nationwide drug distributor and service provider to pharmacies, healthcare providers and manufacturers. The company has an earnings yield of 6.7% compared with the industry's 4.5%. It anticipates earnings to improve 11.6% over the next five years.
Image Source: Zacks Investment Research
What's Driving the Performance?
Cardinal Health's Medical and Pharmaceutical offerings provide it with a competitive edge in its niche area of operations. It offers industry expertise through an expanding portfolio of safe and effective, pharmaceuticals and medical products.
In order to gain market traction and bolster profits, CAH pursues an acquisition-driven strategy and remains committed to investing in its key growth businesses.
The company's Pharmaceutical segment is the second-largest pharmaceutical distributor in the United States. Its products and services include pharmaceutical distribution, manufacturer and specialty solutions, and nuclear and pharmacy offerings. Cardinal Health is expected to draw strength from this segmentin the future.
In the second quarter of fiscal 2023, Pharmaceutical revenues were $47.7 billion, up 15% on a year-over-year basis. The performance suggests branded pharmaceutical sales growth from Pharmaceutical Distribution and Specialty Solutions customers.
On its fiscal second-quarter 2023 earnings call, Cardinal Health raised its earnings expectations. The company now expects adjusted earnings per share (EPS) between $5.20 and $5.50, up from the previous $5.05-$5.40 range.
Notable Developments
In March, CAH collaborated with Signify Health to offer in-home clinical and medication management services. The collaboration will initially focus on addressing interventions recommended for Medicare Advantage members of joint clients, and may expand into additional services (such as population health programs) and clinical interventions. The latest partnership is expected to significantly strengthen Cardinal Health's medication therapy management services.
In July 2022, the company acquired a smart platform for transferring prescriptions directly to patients through a secure mobile app — ScalaMed. The acquisition should have its digital connectivity, leading to higher patient satisfaction and greater medication adherence. It also has the potential to bring more patients to the system, thereby boosting Cardinal Health’s top line.
In the same month, Cardinal Health acquired the Bendcare group purchasing organization (CPO-GPO) entity to strengthen its specialty solutions business. The buyout is likely to expand the company’s distribution opportunities and technology solution offerings for specialty practices.
In June, Cardinal Health partnered with Zipline and began long-range drone deliveries in North Carolina. The partnership between the two companies is aimed at transforming patients’ experience while improving care delivery. It is also focused on mitigating the inventory stock-out risks and lessening the barriers for patients accessing necessary products, especially in difficult-to-reach areas.
During the same month, CAH expanded its warehouse footing by adding a new distribution center in Columbus, OH, to support its at-Home Solutions business. This move is likely to have boosted the company’s pharmaceutical distribution capability, one of the Pharmaceutical business’ services.
What's Weighing on the Stock?
In the second quarter of fiscal 2023, gross margin contracted 30 basis points year over year, suggesting rising costs. The inflationary pressure is likely to continue in the next few quarters.
In the Medical segment, revenues declined 7% to $3.8 billion due to the divestiture of the Cordis business. CAH continued to face inflationary impacts and global supply chain restrictions in terms of products and distribution. These macro headwinds are likely to continue for the rest of the financial year.
Estimates Trend
For fiscal 2023, the Zacks Consensus Estimate for revenues is pegged at $201.83 billion, indicating a 11.3% improvement from the previous year.
The same for adjusted EPS is $5.42, indicating a 7.1% increase from the year-ago reported number.
Cardinal Health, Inc. Price
Cardinal Health, Inc. price | Cardinal Health, Inc. Quote
Stocks to Consider
Some better-ranked stocks from the broader medical space are Becton, Dickinson and Company (BDX - Free Report) , Henry Schein (HSIC - Free Report) and The Cooper Companies (COO - Free Report) .
Becton, Dickinson and Company, carrying a Zacks Rank #2 (Buy) at present, has an estimated long-term growth of 7.8%. BDX’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 6.47%.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The company’s shares have gained 0.8% compared with the industry’s 5.9% growth in the past three months.
Henry Schein, sporting a Zacks Rank #1 at present, has an estimated long-term growth of 8.1%. HSIC’s earnings surpassed estimates in three of the trailing four quarters and met the same once, the average surprise being 2.97%.
The company’s shares have gained 2.6% compared with the industry’s 5.9% growth in the past three months.
The Cooper Companies, carrying a Zacks Rank #2 at present, has an estimated long-term growth of 11%. COO’s earnings missed estimates in three of the trailing four quarters and beat the same once, the average negative surprise being 1.82%.
The company’s shares have gained 10.1% compared with the industry’s 5.9% growth over the past three months.