Cardinal Health (CAH) Hits 52-Week High: What's Aiding It?
Shares of Cardinal Health, Inc. CAH scaled a new 52-week high of $106.35 on Nov 22, 2023, before closing the session marginally lower at $105.88.
Over the past year, this Zacks Rank #2 (Buy) stock has gained 34.5% compared with 10% growth of the industry and a 13.2% rise of the S&P 500 composite.
Over the past five years, the company registered earnings growth of 2.1% compared with the industry’s 7.7% rise. The company’s long-term expected growth rate of 15.2% compares with the industry’s growth projection of 12.6%. Cardinal Health’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 15.7%.
Cardinal Health is witnessing an upward trend in its stock price, prompted by its diversified product portfolio. The optimism led by a solid first-quarter fiscal 2024 performance and the opening of a few distribution centers are expected to contribute further. However, stiff competition and the probability of losing a major customer persist.
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Let’s delve deeper.
Key Growth Drivers
Diversified Product Portfolio: Investors are upbeat about Cardinal Health’s Medical and Pharmaceutical offerings, which provide the company with a competitive edge in the niche space. This month, the company announced the U.S. launch of its SmartGown EDGE Breathable Surgical Gown with ASSIST Instrument Pockets to provide surgical teams with safe and convenient instrument access in the operating room.
In September, Cardinal Health announced the U.S. launch of its Kangaroo OMNI Enteral Feeding Pump, designed to help provide enteral feeding patients with more options to meet their personalized needs throughout their enteral feeding journey.
Distribution Centers: Investors are optimistic about Cardinal Health’s opening of a few distribution centers in strategic areas over the past few months. This month, the company announced its plans to build a new distribution center in Greenville, SC to support its at-Home Solutions business, a home healthcare medical supplies provider serving people with chronic and serious health conditions in the United States.
In May, Cardinal Health Canada announced its plans to open a new distribution center in the Greater Toronto Area, thus expanding its distribution footprint to better meet the medical and surgical product demands of the Canadian healthcare system.
Strong Q1 Results: Cardinal Health’s impressive first-quarter fiscal 2024 results buoy optimism. The company’s robust top-line results and solid performance in the Pharmaceutical segment were encouraging. Per management, the segmental performance was driven by brand and specialty pharmaceutical sales growth from existing customers.
Downsides
Probabilities of Loss of a Major Customer: Cardinal Health faces the risk of losing considerable business if it loses a major customer, which will severely impair its revenues in the future. In this regard, after establishing a generic sourcing joint venture with CVS Caremark in 2014, Cardinal Health largely depends on the former for more than 20% of its revenues. Collectively, five of Cardinal Health’s main customers, including CVS, accounted for as much as 40% of its revenues.
Stiff Competition: Cardinal Health operates in a highly competitive environment in the distribution of pharmaceuticals and consumer healthcare products, as well as in the manufacturing and distribution of medical devices and surgical products. The company also competes on many levels, including price and service offerings.
Other Key Picks
A few other top-ranked stocks in the broader medical space are DaVita Inc. DVA, Integer Holdings Corporation ITGR and DexCom, Inc. DXCM.
DaVita, sporting a Zacks Rank #1 (Strong Buy), has an estimated long-term growth rate of 18.3%. DVA’s earnings surpassed estimates in all the trailing four quarters, with an average surprise of 36.6%. You can see the complete list of today’s Zacks #1 Rank stocks here.
DaVita’s shares have gained 34.9% compared with the industry’s 3.5% rise in the past year.
Integer Holdings, sporting a Zacks Rank #1 at present, has an estimated long-term growth rate of 15.8%. ITGR’s earnings surpassed estimates in all the trailing four quarters, with an average of 11.9%.
Integer Holdings has gained 25.1% against the industry’s 6.4% decline over the past year.
DexCom, carrying a Zacks Rank #2 at present, has an estimated long-term growth rate of 33.6%. DXCM’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 36.4%.
DexCom has lost 3.5% compared with the industry’s 6.4% decline over the past year.
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DaVita Inc. (DVA) : Free Stock Analysis Report
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Integer Holdings Corporation (ITGR) : Free Stock Analysis Report
