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Why Is Cardinal Health (CAH) Up 2.5% Since Its Last Earnings Report?

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It has been about a month since the last earnings report for Cardinal Health, Inc. (CAH - Free Report) . Shares have added about 2.5% in that time frame.

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

Recent Earnings

Cardinal Health reported third-quarter fiscal 2018 adjusted earnings of $1.39 per share, which missed the Zacks Consensus Estimate of $1.51. Adjusted earnings fell 9% year over year.

Revenues increased 6% on a year-over-year basis to almost $33.63 billion and edged past the Zacks Consensus Estimate of $33.60 billion.

Segmental Analysis

Pharmaceutical Segment

Pharmaceutical revenues increased 5% to $29.72 billion on a year-over-year basis. The segment witnessed strong growth in the Specialty business and gained a large number of Pharmaceutical Distribution customers.

However, the segment witnessed expiration of a large, mail-order customer contract along with the divestiture of the company's China distribution business.

Pharmaceutical witnessed a 3% decline in profits to $596 million, thanks to generic pharmaceutical pricing.

Medical Segment

Revenues in the segment improved 15% to $3.92 billion, primarily on higher contributions from new and existing customers along with the acquisition of the Patient Recovery business. Medical segment profits increased 34% to $199 million.

Margin Analysis

Gross Profit increased 10.7% year over year to $1.91 billion.As a percentage of revenues, gross margin expanded 30 basis points (bps) to 5.7% of net revenues.

Guidance

The company slashed guidance for fiscal 2018 adjusted earnings per share to $4.85-$4.95.

The downside was caused by the company's effective tax rate associated with the Cordis business.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. There have been seven revisions lower for the current quarter.

Cardinal Health, Inc. Price and Consensus

 

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

VGM Scores

Currently, CAH has a nice Growth Score of B, though it is lagging a bit on the momentum front with a C. The stock was allocated a grade of A on the value side, putting it in the top quintile 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 primarily suitable for value investors while also being suitable for those looking for growth and to a lesser degree momentum.

Outlook

Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. It's no surprise CAH has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.




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