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Cardinal Health (CAH) to Post Q2 Earnings: What's in Store?

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Zacks Equity Research
·4 min read
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Cardinal Health, Inc. CAH is scheduled to report second-quarter fiscal 2021 results on Feb 5, before the opening bell.

In the last reported quarter, the company delivered an earnings surprise of 32.5%. It beat estimates in each of the trailing four quarters, the average surprise being 21.4%.

Q2 Estimates

For the fiscal second quarter, the Zacks Consensus Estimate for earnings is pegged at $1.45 per share, indicating a decline 4.6% from the prior-year quarter. The same for revenues stands at $41.54 billion, suggesting growth of 4.5% from the year-ago reported figure.

Factors to Note

Cardinal Health’s Pharmaceutical segment is the second largest pharmaceutical distributor in the United States. Elective procedures and physician office visits are expected to recover to pre-COVID 19 levels exiting fiscal 2021, with a more substantial impact in the first half of the year. This might get reflected in the segment’s results in the to-be-reported quarter.

In fact, higher contribution from key growth areas — Specialty and Connected Care — and sustained dynamics within its generics program are likely to have favored the segment’s performance in the to-be-reported quarter.

Cardinal Health, Inc. Price and EPS Surprise

Cardinal Health, Inc. Price and EPS Surprise
Cardinal Health, Inc. Price and EPS Surprise

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

In the fiscal first quarter, pharmaceutical revenues rose 5% to $35.11 billion on a year-over-year basis. The upside can be attributed to growth in sales from Pharmaceutical Distribution and Specialty Solutions customers. Despite the decline in volumes related to COVID-19, the segment witnessed an increase of 1% in profits to $402 million driven by rise in contribution from brand sales mix. This trend is likely to have continued in the fiscal second quarter.

Also, Cardinal Health’s Medical unit may have contributed significantly to the overall fiscal first-quarter performance. Notably, the segment manufactures products such as single-use surgical drapes, gowns and apparel, exam and surgical gloves, which may have favored sales in the to-be-reported quarter.

In the fiscal second quarter, revenues at this segment are likely to reflect increase in sales in Cardinal Health at Home.

Moreover, the company has been committed toward improving efficiencies across its Medical segment by refining commercial, operational and data capabilities. We anticipate these to get reflected in the fiscal second-quarter results.

The company may have gained from its cost savings initiative related to actions intended to optimize and simplify the company's operating model and cost structure. This, in turn, might have aided the company’s margins in the to-be-reported quarter.

Further, the Cardinal Health’s diversified product portfolio is likely to have contributed to the fiscal second-quarter performance.

However, stiff competition in each of the company’s business segments may have weighed on the segment margins and consequently, might have limited profitability in the fiscal second quarter.

Here’s What the Quantitative Model Suggests

Per our proven model, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. This is not the case here.

Earnings ESP: Cardinal Health has an Earnings ESP of -0.20%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: The company carries a Zacks Rank #3.

Stocks Worth a Look

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

AmerisourceBergen Corporation ABC has an Earnings ESP of +2.58% and a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Becton, Dickinson and Company BDX has an Earnings ESP of +7.46% and a Zacks Rank of 2.

Ecolab Inc. ECL has an Earnings ESP of +0.08% and a Zacks Rank of 3.

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