Cardinal Health Gains on Enhanced Share Repurchase Program

Zacks Equity Research

Shares of drug-distributor Cardinal Health Inc. (CAH) rose 1.7% till date since the announcement of its enhanced share repurchase program. Last week, the company’s board of directors increased its existing share repurchase program (initiated on Oct 31, 2013) by another $1 billion.

On Oct 29, 2013, Cardinal Health’s board of directors approved a $1.0 billion share repurchase program, which expires on Dec 31, 2016. During the fourth quarter of fiscal 2014 ended Jun 30, 2014, the company has repurchased $273 million of its shares under the program. Thus, with the latest enhanced authorization, Cardinal Health has roughly $1.7 billion worth of shares available for repurchase under the program.

Apart from the October program, Cardinal Health has another share repurchase program initiated on Aug 8, 2012. Under that program, the company’s board of directors approved $750 million worth of shares for repurchase. During the fourth quarter of fiscal 2014 ended Jun 30, 2014, Cardinal Health has repurchased $11 million of its shares under the program

Cardinal Health posted adjusted earnings per share of 83 cents for the fourth quarter of fiscal 2014 that rose 5.1% from 79 cents in the comparable quarter of fiscal 2013 and edged past the Zacks Consensus Estimate by a couple of cents. Adjusted net earnings upped 3.6% to $284 million from $274 million in the fourth quarter of fiscal 2013.

For the fiscal year, adjusted earnings rose 2.9% to $3.84 per share from $3.73 in fiscal 2013 and inched past the Zacks Consensus Estimate by 2 cents. The rise in earnings despite lower revenues in both the periods is attributable to lower operating expenses in both the quarter (48.5%) and fiscal year (16.5%).

Revenues in the quarter fell 9.9% to $22,894 million, but surpassed the Zacks Consensus Estimate of $21,779 million. Revenues for the year dipped 9.9% to $91,084 million, but beat the Zacks Consensus Estimate of $89,949 million. The fall in revenues in both the periods is attributable to lower revenues generated from the Pharmaceutical segment.

For fiscal 2015, Cardinal Health projected adjusted earnings per share in the band of $4.10 to $4.30, reflecting an estimated rise of 6.8 to 12.0% over fiscal 2013. The current Zacks Consensus Estimate of $4.25 for the year lies within the guided range.

Cardinal Health currently has a Zacks Rank #3 (Hold). Some better-ranked stocks from the medical/dental supplies industry include McKesson Corporation (MCK) and from the medical products industry include ICU Medical, Inc. (ICUI) and Medtronic, Inc. (MDT). ICU Medical sports a Zacks Rank #1 (Strong Buy), while both McKesson and Medtronic carry a Zacks Rank #2 (Buy).

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