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Reasons to Retain Cardinal Health (CAH) in Your Portfolio Now
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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, inflationary pressure remains a concern.
Shares of this Zacks Rank #3 (Hold) company have lost 4.4% year to date compared with the industry's 0.3% decline. The S&P 500 Index has increased 3% in the same time frame.
CAH, with a market capitalization of $23.48 billion, is a nationwide drug distributor and service provider to pharmacies, healthcare providers and manufacturers. The company has an earnings yield of 7.6% compared with the industry's 5.7%. It anticipates earnings to improve 12% over the next five years.
Image Source: Zacks Investment Research
What's Driving CAH’s Performance?
Diversified Product Portfolio: Investors are upbeat about Cardinal Health’s Medical and Pharmaceutical offerings, which provide the company with a competitive edge in the niche space.
In December 2023, the company announced the U.S. launch of its SmartGown EDGE Breathable Surgical Gown with ASSIST Instrument Pockets. The idea was to provide surgical teams with safe and convenient instrument access in the operating room. CAH launched its Kangaroo OMNI Enteral Feeding Pump in the U.S. market last year to provide enteral feeding patients with more options to meet their personalized needs.
Distribution Centers: Investors are optimistic about Cardinal Health’s introduction of a few distribution centers in strategic areas over the past few months.
Last month, the company started the construction of a new logistics center in Columbus, OH, that will serve as a centralized replenishment center for the distribution of over-the-counter consumer health products in support of its core pharmaceutical business.
In December 2023, CAH announced its plans to build a new distribution center in Greenville, SC, to support its at-Home Solutions business, a home healthcare medical supplies provider serving people with chronic and serious health conditions in the United States.
Strong Q3 Results: Cardinal Health’s impressive third-quarter fiscal 2024 results buoy optimism. The company’s robust top-line results and solid performance in the Pharmaceutical segment were encouraging. Per management, the segmental performance was driven by brand and specialty pharmaceutical sales growth from existing customers.
In the third quarter of fiscal 2024, gross profit increased 9.1% year over year, driven by segmental growth.
Notable Developments
In January 2024, the company announced that it has entered into a definitive agreement to acquire Specialty Networks, a technology-enabled multi-specialty group purchasing and practice enhancement organization for $1.2 billion in cash. Specialty Networks creates clinical and economic value for independent specialty providers and partners across multiple specialty GPOs.
In November, CAH announced the launch of SmartGown EDGE Breathable Surgical Gown with ASSIST Instrument Pockets in the United States. The new surgical gown is expected to provide surgical teams with safe and convenient instrument access in the operating room.
The company continues to face high costs to support sales as well as rising operating expenses. Although there is an improving trend for costs and expenses, these are likely to hurt margins in fiscal 2024, especially in the first half. Meanwhile, rising interest rates are a key area of concern amid high Capex plans.
Cardinal Health’s Monoject syringes got unfavorable FDA recommendations in March, following reports of delay in therapy as well as inaccurate therapy (overdose or underdose) when used with a syringe pump or a patient-controlled analgesia pump. Any further regulatory setback may raise concerns.
Estimate Trend
The Zacks Consensus Estimate for fiscal 2024 revenues is pegged at $225.8 billion, indicating a 10.2% improvement from the previous year’s level.
The same for adjusted EPS is pinned at $7.35, indicating a 26.9% increase from the year-ago reported numbers. The consensus estimate for adjusted EPS has improved 1% in the past 30 days.
Stocks to Consider
Some better-ranked stocks in the broader medical space are DaVita Inc. (DVA - Free Report) , Align Technology (ALGN - Free Report) and Encompass Health (EHC - Free Report) .
DaVita, carrying a Zacks Rank #2 (Buy) at present, has an estimated long-term growth rate of 13.6%. DVA’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 29.35%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
DaVita’s shares have risen 32.2% year to date compared with the industry’s 0.3% growth.
Align Technology, carrying a Zacks Rank of 2 at present, has an estimated long-term growth rate of 6.9%. ALGN’s earnings surpassed estimates in three of the trailing four quarters and missed the same in one, delivering an average surprise of 5.92%.
Align Technology’s shares have lost 6.7% year to date compared with the industry’s 3.2% decline.
Encompass Health, carrying a Zacks Rank of 2 at present, has an estimated long-term growth rate of 15.6%. EHC’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 18.74%.
Encompass Health’s shares have risen 26.6% year to date compared with the industry’s 8.7% growth.
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Reasons to Retain Cardinal Health (CAH) in Your Portfolio Now
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, inflationary pressure remains a concern.
Shares of this Zacks Rank #3 (Hold) company have lost 4.4% year to date compared with the industry's 0.3% decline. The S&P 500 Index has increased 3% in the same time frame.
CAH, with a market capitalization of $23.48 billion, is a nationwide drug distributor and service provider to pharmacies, healthcare providers and manufacturers. The company has an earnings yield of 7.6% compared with the industry's 5.7%. It anticipates earnings to improve 12% over the next five years.
Image Source: Zacks Investment Research
What's Driving CAH’s Performance?
Diversified Product Portfolio: Investors are upbeat about Cardinal Health’s Medical and Pharmaceutical offerings, which provide the company with a competitive edge in the niche space.
In December 2023, the company announced the U.S. launch of its SmartGown EDGE Breathable Surgical Gown with ASSIST Instrument Pockets. The idea was to provide surgical teams with safe and convenient instrument access in the operating room. CAH launched its Kangaroo OMNI Enteral Feeding Pump in the U.S. market last year to provide enteral feeding patients with more options to meet their personalized needs.
Distribution Centers: Investors are optimistic about Cardinal Health’s introduction of a few distribution centers in strategic areas over the past few months.
Last month, the company started the construction of a new logistics center in Columbus, OH, that will serve as a centralized replenishment center for the distribution of over-the-counter consumer health products in support of its core pharmaceutical business.
In December 2023, CAH announced its plans to build a new distribution center in Greenville, SC, to support its at-Home Solutions business, a home healthcare medical supplies provider serving people with chronic and serious health conditions in the United States.
Strong Q3 Results: Cardinal Health’s impressive third-quarter fiscal 2024 results buoy optimism. The company’s robust top-line results and solid performance in the Pharmaceutical segment were encouraging. Per management, the segmental performance was driven by brand and specialty pharmaceutical sales growth from existing customers.
In the third quarter of fiscal 2024, gross profit increased 9.1% year over year, driven by segmental growth.
Notable Developments
In January 2024, the company announced that it has entered into a definitive agreement to acquire Specialty Networks, a technology-enabled multi-specialty group purchasing and practice enhancement organization for $1.2 billion in cash. Specialty Networks creates clinical and economic value for independent specialty providers and partners across multiple specialty GPOs.
In November, CAH announced the launch of SmartGown EDGE Breathable Surgical Gown with ASSIST Instrument Pockets in the United States. The new surgical gown is expected to provide surgical teams with safe and convenient instrument access in the operating room.
Cardinal Health, Inc. Price
Cardinal Health, Inc. price | Cardinal Health, Inc. Quote
What's Weighing on the Stock?
The company continues to face high costs to support sales as well as rising operating expenses. Although there is an improving trend for costs and expenses, these are likely to hurt margins in fiscal 2024, especially in the first half. Meanwhile, rising interest rates are a key area of concern amid high Capex plans.
Cardinal Health’s Monoject syringes got unfavorable FDA recommendations in March, following reports of delay in therapy as well as inaccurate therapy (overdose or underdose) when used with a syringe pump or a patient-controlled analgesia pump. Any further regulatory setback may raise concerns.
Estimate Trend
The Zacks Consensus Estimate for fiscal 2024 revenues is pegged at $225.8 billion, indicating a 10.2% improvement from the previous year’s level.
The same for adjusted EPS is pinned at $7.35, indicating a 26.9% increase from the year-ago reported numbers. The consensus estimate for adjusted EPS has improved 1% in the past 30 days.
Stocks to Consider
Some better-ranked stocks in the broader medical space are DaVita Inc. (DVA - Free Report) , Align Technology (ALGN - Free Report) and Encompass Health (EHC - Free Report) .
DaVita, carrying a Zacks Rank #2 (Buy) at present, has an estimated long-term growth rate of 13.6%. DVA’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 29.35%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
DaVita’s shares have risen 32.2% year to date compared with the industry’s 0.3% growth.
Align Technology, carrying a Zacks Rank of 2 at present, has an estimated long-term growth rate of 6.9%. ALGN’s earnings surpassed estimates in three of the trailing four quarters and missed the same in one, delivering an average surprise of 5.92%.
Align Technology’s shares have lost 6.7% year to date compared with the industry’s 3.2% decline.
Encompass Health, carrying a Zacks Rank of 2 at present, has an estimated long-term growth rate of 15.6%. EHC’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 18.74%.
Encompass Health’s shares have risen 26.6% year to date compared with the industry’s 8.7% growth.