On Nov 28, Zacks Investment Research raised Cardinal Health Inc. CAH to a Zacks Rank #1 (Strong Buy) on impressive first-quarter fiscal 2016 results and an encouraging 2016 outlook.
Why the Upgrade?
In the first quarter of 2016, Cardinal Health reported adjusted earnings of $1.38 per share, which surged almost 38% on a year-over-year basis. This upside was driven by a 16.6% increase in revenues to $28.01 billion. Adjusted operating margin expanded 20 basis points on a year-over-year basis to 2.6%.
Cardinal Health raised its fiscal 2016 adjusted earnings guidance range to $5.15–$5.35 from the previous range of $4.85–$5.05. This new range reflects 18%–22% growth compared to fiscal 2015.
We believe that fiscal 2016 holds considerable promise for Cardinal Health owing to the strengthening product portfolio. The addition of The Harvard Drug Group and Cordis from Johnson & Johnson JNJ are also key catalysts in this regard.
Cardinal Health is banking on strategic buyouts, joint ventures and supply agreements to drive growth. Furthermore, we believe that growth in new and existing customer count as well as consistent stock repurchases will boost earnings.
Estimate Revision
The Zacks Consensus Estimate for fiscal 2016 is currently pegged at $5.30, which reflects an increase of 5.4% (27 cents) over the last 30 days. Likewise, over the same time frame, the Zacks Consensus Estimate for fiscal 2017 has moved up 3.8% (22 cents) to $5.95.
We believe that these revisions indicate significant top-line growth.
Other Stocks to Consider
Other favorably ranked stocks include Masimo Corp MASI and Fluidigm FLDM, each carrying the same Zacks Rank as Cardinal Health.
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