Earnings Preview: Cardinal Health - Analyst Blog
August 01 2012 - 2:35PM
Zacks
Cardinal Health (CAH) is slated to report
fourth quarter and fiscal 2012 results on Thursday, August 2. The
current Zacks Consensus Estimate for the fourth quarter is 72
cents, representing an estimated 22.5% year-over-year hike.
Third Quarter Recap
Cardinal Health posted fiscal third-quarter 2012 (ended March
31) adjusted (excluding one-time charges and gains) earnings per
share from continuing operations of 94 cents, beating the Zacks
Consensus Estimate of 88 cents and the year-ago earnings of 81
cents per share.
Earnings from continuing operations (as reported) were up about
33% year over year to $332.5 million (or 95 cents a share).
Total revenues were $26.9 billion in the quarter, up about 3%
year over year, beating the Zacks Consensus Estimate of $26.6
billion.
The Pharmaceutical segment reported revenues of $24.5 billion,
up approximately 3% year over year. Revenues from the Medical
segment were $2.4 billion in the third quarter, up 8%, due to
higher sales to pre-existing clients.
Estimate Revision Trend
Agreement
Estimates for the fiscal fourth quarter have been stagnant. Out
of a total of 11 analysts covering the stock, there were no
revisions in the prior week and past month.
With regard to estimates for fiscal 2012, no analysts (out of
12) raised or lowered his/her estimate over the past week and prior
month. The current Zacks Consensus Estimate for fiscal 2012 is
$3.20, representing an estimated 19.9% year-over-year
increase.
Magnitude
The magnitude of estimate revision for the fourth quarter, as
well as fiscal 2012, has been static over the prior week as well as
the past month.
Cardinal has generated positive surprises in each of the
previous four quarters and we believe the same trend may continue.
The company produced an average positive earnings surprise of 4.1%
over the preceding four quarters, meaning that it beat the Zacks
Consensus Estimate by that measure.
Our Take
Cardinal Health is ranked in the Fortune 500. With over $100
billion in annual sales, Cardinal Health remains one of the largest
distributors of pharmaceuticals and medical supplies in the U.S.,
with a diversified product portfolio, which may partly insulate it
from the current economic uncertainty.
The company stands to gain from the gradual shift in mix from
the bulk to the higher-margin non-bulk sector of the Pharmaceutical
segment. It is also riding the generic wave. Overall, Cardinal is
benefiting from a spate of tuck-in acquisitions and capital
deployment strategies.
However, the company faces tough competition across all its
business segments, which may continue to pressure pricing and
margins. Its major competitors in the pharmaceutical supply chain
segment include McKesson Corp. (MCK) and
AmerisourceBergen Corp. (ABC). We currently have a
long-term Neutral rating on Cardinal. The stock currently retains a
Zacks #3 Rank, which translates into a short-term Hold
recommendation.
AMERISOURCEBRGN (ABC): Free Stock Analysis Report
CARDINAL HEALTH (CAH): Free Stock Analysis Report
MCKESSON CORP (MCK): Free Stock Analysis Report
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