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Why Is Cardinal Health (CAH) Down 2.7% Since the Last Earnings Report?

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It has been more than a month since the last earnings report for Cardinal Health, Inc. (CAH - Free Report) . Shares have lost about 2.7% in that time frame, underperforming the market.

Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Recent Earnings

Cardinal Health Inc. reported fourth-quarter fiscal 2017 adjusted earnings of $1.31 per share, which beat the Zacks Consensus Estimate of $1.24 and increased 14.9% on a year-over-year basis.

Revenues increased 5% on a year-over-year basis to almost $33 billion, beating the Zacks Consensus Estimate of $32.8 billion.

Quarter Details

Pharmaceutical Segment: Pharmaceutical revenues rose 5% to $29.6 billion on a year-over-year basis. The segment witnessed strong growth in the Specialty business and also gained a huge number of Pharmaceutical Distribution customers.

However, generic pharmaceutical pricing and the company's recent investments in its Pharmaceutical IT platform led to a 7% drop in segmental profits. However, solid performance by the Red Oak Sourcing platform has partially offset the negative effect.

Medical Segment: Revenues at the segment increased 9% to $3.4 billion primarily on higher contributions from new and existing customers.

Medical segment profits increased 13% to $138 million, courtesy of higher contributions from new and existing customers and solid performance by the post-acute segment. However, unfavorable performances by Cardinal Health Branded products (including Cordis) partially offset sales at the segment.

Other Details: Distribution, selling, general and administrative (SG&A) expenses increased 3% on a year-over-year basis to $377 million in the reported quarter. Cash and equivalents were $6879 million as of Jun 30, 2017.

FY17 Highlights

For fiscal 2017, Cardinal Health registered adjusted earnings of $5.40 per share, up 3% on a year-over-year basis. Revenues increased 7% on a year-over-year basis to a record $130 billion.

Delving deeper into the segmental revenue details, Pharmaceutical segment (89.6% of net revenues) increased 7% to $116.5 billion in fiscal 2017. Medical segment (10.4% of net revenues) revenues soared 95% on a year-over-year basis to $13.5 billion.

Guidance

The company issued fiscal 2018 guidance for adjusted earnings per share from continuing operations of $4.85–$5.10. Furthermore, Cardinal Health is expected to register fiscal 2019 adjusted earnings per share of at least $5.60.

How Have Estimates Been Moving Since Then?

Following the release, investors have witnessed a upward trend for fresh estimates. There has been one revision higher for the current quarter.

Cardinal Health, Inc. Price and Consensus

 

Cardinal Health, Inc. Price and Consensus | Cardinal Health, Inc. Quote

VGM Scores

At this time, Cardinal Health's stock has a nice Growth Score of B, though it is lagging a bit on the momentum front with C. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Based on our scores, the stock is more suitable for value investors than those looking for growth and to a lesser degree momentum.

Outlook

While estimates have been broadly trending upward for the stock, the magnitude of these revisions has been net zero. The stock has a Zacks Rank #4 (Sell). We are expecting a below average return from the stock in the next few months.




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