On Dec 26, Zacks Investment Research raised Cardinal Health Inc. CAH to a Zacks Rank #1 (Strong Buy) on an encouraging 2016 outlook and estimate revisions.
Why the Upgrade?
Based on its impressive first-quarter results, Cardinal Health raised its fiscal 2016 adjusted earnings guidance range to $5.15–$5.35 from the previous $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 strength in its product portfolio. The addition of The Harvard Drug Group and Cordis from Johnson & Johnson JNJ are also key catalysts in this regard.
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 and the Red Oak Sourcing joint venture with CVS Health are expected to enhance the long-term prospects of the company.
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 60 days. Likewise, over the same time frame, the Zacks Consensus Estimate for fiscal 2017 has moved up 3.8% (22 cents) to $5.95.
Other Stocks to Consider
Other favorably ranked stocks in the same space include Masimo Corp MASI and Fluidigm FLDM, each carrying the same Zacks Rank as Cardinal Health.
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