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What's in Store for Cardinal Health's (CAH) Q2 Earnings?

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Cardinal Health, Inc.’s (CAH - Free Report) second-quarter fiscal 2020 results are scheduled for release on Feb 6, before the opening bell.

In the last reported quarter, the company delivered a positive earnings surprise of 16.5%. Further, it has an average four-quarter positive surprise of 16.4%.

Q2 Estimates

For the fiscal second quarter, the Zacks Consensus Estimate for earnings is pegged at $1.21 per share, indicating a decline of 6.2% from the year-ago quarter. The same for revenues stands at $39.48 billion, suggesting growth of 4.6% from the year-ago reported figure.

Pharmaceutical to Drive Fiscal Q2

Cardinal Health’s Pharmaceutical segment is the second largest pharmaceutical distributor in the United States. Probable sales growth from pharmaceutical distribution and specialty customers is anticipated to get reflected in the Pharmaceutical segment’s second-quarter fiscal bottom line. Better-than-expected performance at this segment is likely to have driven the company’s second-quarter fiscal performance.

Notably, for the fiscal second-quarter, the Zacks Consensus Estimate for the unit’s revenues stands at $35.47 billion, suggesting growth of 5.1% from the year-ago quarter.

Moreover, positive impact from Specialty Solutions, higher contribution from brand sales and mix, and benefit derived from the cost savings initiatives are likely to have contributed to the segment’s profits.

Cardinal Health, Inc. Price and EPS Surprise

 

Cardinal Health, Inc. Price and EPS Surprise

Cardinal Health, Inc. price-eps-surprise | Cardinal Health, Inc. Quote

Other Factors at Play

Cardinal Health’s Medical unit is likely to have contributed significantly to the overall fiscal second-quarter performance. In fact, the segment manufactures products such as single-use surgical drapes, gowns and apparel, exam and surgical gloves, which is likely to have benefited sales in the to-be-reported quarter.

Moreover, the company remains committed toward improving efficiencies across its Medical segment by refining commercial, operational and data capabilities. We anticipate these to reflect on the fiscal second-quarter results.

In the fiscal first quarter 2020 earnings call, management reaffirmed that it estimates an incremental $130 million in cost savings in fiscal 2020 related to actions intended to optimize and simplify the company's operating model and cost structure. This in turn is likely to aid the company’s margins in the to-be-reported quarter.

Further, the Cardinal Health’s acquisition-driven strategy and diversified product portfolio are likely to have contributed to the company’s overall fiscal second-quarter performance.
 
However, integration risks owing to the buyouts that the company continues to make are likely to have weighed on the fiscal second-quarter performance.

Further, stiff competition in each of the company’s business segments is likely to get reflected in the segment margins and consequently might impede profitability in the fiscal second quarter.

Here’s What the Quantitative Model Suggests

Per our proven model, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. This is not the case here.

Earnings ESP: Cardinal Health has an Earnings ESP of -5.19%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Cardinal Health carries a Zacks Rank #2.

Other Stocks to Consider

Here are a few medical stocks worth considering as they have the right combination of elements to post an earnings beat this quarter.

McKesson Corporation (MCK - Free Report) has an Earnings ESP of +0.07% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

DexCom, Inc. (DXCM - Free Report) has an Earnings ESP of +17.07% and a Zacks Rank #2.

Zimmer Biomet Holdings, Inc. (ZBH - Free Report) has an Earnings ESP of +0.38% and a Zacks Rank #3.

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