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Here's Why You Should Invest in Cardinal Health Stock Now

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Cardinal Health Inc. CAH is well poised for growth backed by diversified product portfolio, acquisition-driven strategy and robust pharmaceutical segment.

Shares of Cardinal Health have gained 7.4%, against the industry’s decline of 2.1% in a year’s time. Further, the S&P 500 Index rallied 21% in the same timeframe.

The company, with a market capitalization of $17.39 billion, is a nation-wide drug distributor and provider of services to pharmacies, healthcare providers and manufacturers. It anticipates earnings to improve 6.2% over the next five years. Moreover, it has beat estimates in the trailing four quarters by 18.2%, on average.

Let’s take a closer look at the factors that substantiate the company’s Zacks Rank #2 (Buy).

Factors to Bolster Cardinal Health

Cardinal Health’s Medical and Pharmaceutical offerings provide the company a competitive edge in the niche space. It offers industry expertise through an expanding portfolio of safe products.

The company follows an acquisition-driven strategy and remains committed toward investment in key growth businesses to gain market traction and bolster profits.

The company’s Pharmaceutical segment boasts of being the second largest pharmaceutical distributor in the United States. The segment’s products and services comprise of pharmaceutical distribution, manufacturer and specialty services, and nuclear and pharmacy services. These, in turn, are anticipated to drive the company in the days ahead.

Notably, in the fiscal second quarter of 2020, pharmaceutical revenues improved 5.9% to $35.71 billion on a year-over-year basis. The upside can be attributed to sales growth from Pharmaceutical Distribution and Specialty Solutions customers.

In fourth-quarter fiscal 2019 earnings call, Cardinal Health announced that it anticipates incremental cost savings of $130 million associated with actions intended to optimize and simplify operating model and cost structure.

In fact, per the fiscal second-quarter 2020 earnings call, the company anticipates to meet or exceed its $130 million commitment for the year primarily on the back of selling, general and administrative activities. It is expected that the benefits from this and additional actions will continue to improve through the balance of 2020. This is likely to drive the company’s margins in the days ahead.

Which Way Are Estimates Headed?

For fiscal 2020, the Zacks Consensus Estimate for revenues is pegged at $152.92 billion, indicating an improvement of 5.1% from the year-ago period. For adjusted earnings per share, the same stands at $5.33, suggesting growth of 0.9% from the year-ago reported figure.

Other Stocks to Consider

Some other top-ranked stocks from the broader medical space include Patterson Companies, Inc. PDCO, West Pharmaceutical Services, Inc. WST and DENTSPLY SIRONA, Inc. (XRAY - Free Report) , each currently carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Patterson Companies has an expected long-term earnings growth rate of 6.4%.

West Pharmaceutical has an estimated long-term earnings growth rate of 14%.

DENTSPLY SIRONA has a projected long-term earnings growth rate of 11.6%.

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