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What's in Store for Cardinal Health (CAH) in Q4 Earnings?

Zacks Equity Research

Cardinal Health, Inc.’s CAH fourth-quarter fiscal 2019 results are scheduled for release on Aug 8, before the opening bell.

In the last reported quarter, the company delivered a positive earnings surprise of 11.2%. Further, it has an average four-quarter positive surprise of 14.9%.

Let’s take a look at how things are shaping up prior to this announcement.

Which Way Are Q4 Estimates Treading?

For the to-be-reported quarter, the Zacks Consensus Estimate for earnings is pegged at 96 cents per share, indicating a decline of 4.9% from the year-ago quarter. The same for revenues stands at $36.90 billion, suggesting growth of 4.4% from the year-ago reported figure.

Cardinal Health, Inc. Price and EPS Surprise

 

Cardinal Health, Inc. Price and EPS Surprise

Cardinal Health, Inc. price-eps-surprise | Cardinal Health, Inc. Quote

Pharmaceutical to Drive Fiscal Q4

Cardinal Health’s Pharmaceutical segment is the second largest pharmaceutical distributor in the United States. The company is likely to witness revenue growth at Pharmaceutical segment in the to-be-reported quarter fueled by probable sales growth from pharmaceutical distribution and specialty customers. Better-than-expected performance at this segment is likely to drive the company’s fourth-quarter fiscal results.

Notably, for the fourth quarter, the Zacks Consensus Estimate for the unit’s revenues stands at $32.97 billion, suggesting growth of 4.8% from the year-ago quarter.

Other Factors at Play

Cardinal Health expects to witness notable contributions from its Medical unit. In fact, the segment manufactures products such as single-use surgical drapes, gowns and apparel, exam and surgical gloves, which will bolster sales in the to-be-reported quarter.

Moreover, the company remains committed toward improving efficiencies across its Medical segment by refining commercial, operational and data capabilities. We expect this step to reflect on the fourth-quarter results.

During the fiscal third quarter earnings call, management announced that it will exceed its initial commitment of targeted annualized cost savings of $100 million in fiscal 2019. Management at Cardinal Health announced that the benefits from this and additional actions will continue to improve throughout the year in 2019. This is likely to reflect in the company’s margins in the quarters ahead. Consequently, we can expect to witness a similar trend in the to-be-reported quarter.

Further, the Cardinal Health’s acquisition-driven strategy and diversified product portfolio are likely to contribute to the company’s overall performance in the to-be-reported quarter.  
 
However, Cardinal Health might experience integration risks owing to the buyouts that the company continues to make.

Further, stiff competition in each of the company’s business segments is likely to pose a threat to the margins of such segments. This in turn might put pressure on the company’s profitability in the to-be-reported quarter.

 What Our Quantitative Model Suggests

Our proven model clearly indicates that a stock needs to have both — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — to deliver a positive earnings surprise. This is not the case here.

Earnings ESP: Cardinal Health has an Earnings ESP of -3.13%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Cardinal Health carries a Zacks Rank #3.

Please note that we caution against stocks with a Zacks Rank #4 (Sell) or 5 (Strong Sell) going into the earnings announcement, especially when the company is seeing negative estimate revisions.  
 
Stocks Worth a Look

Here are some other medical stocks worth considering as these too have the right combination of elements to post an earnings beat this quarter.

Henry Schein, Inc. HSIC has an Earnings ESP of +2.41% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here. 

Anavex Life Sciences Corp. AVXL has an Earnings ESP of +4.00% and a Zacks Rank #2.

Bio-Techne Corporation TECH has an Earnings ESP of +1.27% and a Zacks Rank #2.

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