Cardinal Health, Inc. CAH continues to follow an acquisition-driven strategy in order to gain market traction and boost profits. The company’s naviHealth subsidiary has reportedly completed the acquisition of RightCare Solutions. The financial terms of the deal were however not disclosed.
naviHealth is a provider of post-acute management solutions. RightCare Solutions, on the other hand, is a provider of hospital discharge planning software. The buyout is expected to complement naviHealth’s existing business, while boosting its current customer base.
This October, Cardinal Health also completed the acquisition of Johnson & Johnson's (JNJ) Cordis business unit for $1.944 billion. The addition of the Cordis unit will strengthen Cardinal Health’s position in the cardiovascular market. The newly acquired business will be integrated into Cardinal Health’s Medical Segment.
Notably, Cardinal Health expects the deal to add 20 cents (including 7 to 8 cents of interest expense) to fiscal 2017 adjusted EPS and save $100 million in annual costs by the end of fiscal 2018. However, the acquisition is expected to be somewhat dilutive to adjusted EPS in fiscal 2016.
In July this year, Cardinal Health completed the acquisition of The Harvard Drug Group (“THDG”) for almost $1.12 billion in cash. Notably, the buyout deal was announced in early June.
Over the past five years, the company executed four large acquisitions – AssuraMed (2013), Kinray (2010), Cardinal Health China (2010) and Healthcare Solutions Holding (2010) – which have considerably boosted the company’s offerings in diversified fields.
Apart from strategic buyouts, joint ventures and supply agreements are expected to bode well for the company in the coming quarters. The long-term strategic agreement with Henry Schein (HSIC) and the Red Oak Sourcing joint venture with CVS Health (CVS) are expected to enhance the long-term prospects of the company.
Zacks Rank & Other Key Picks
Cardinal Health carries a Zacks Rank #2 (Buy).
Other well placed stocks in the medical sector include Masimo MASI, Steris Plc STE and Natus Medical BABY. All the stocks sport a Zacks Rank #1 (Strong Buy).
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