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Cardinal Health (CAH) to Post Q3 Earnings: What's in Store?

Cardinal Health, Inc. CAH is scheduled to report third-quarter fiscal 2021 results on May 6, before the opening bell.

In the last reported quarter, the company delivered an earnings surprise of 20%. It beat estimates in each of the trailing four quarters, the average surprise being 20%.

Q3 Estimates

For the fiscal third quarter, the Zacks Consensus Estimate for earnings is pegged at $1.57 per share, indicating a decline 3.1% from the prior-year quarter. The same for revenues stands at $39.99 billion, suggesting growth of 2.1% 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 second quarter, pharmaceutical revenues rose 4.3% to $37.24 billion on a year-over-year basis. The upside can be attributed to growth in sales from Pharmaceutical Distribution and Specialty Solutions customers. Consequently, this trend is likely to have sustained in the to-be-reported quarter.

Also, Cardinal Health’s Medical unit may have contributed significantly to the overall fiscal third-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 third quarter, revenues at this segment are likely to reflect increase in sales from personal protective equipment (PPE) and increase in volumes in its lab business.

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 third-quarter results.

Per the fiscal second-quarter earnings call, the company continues to remain aggressive when it comes to cost control measures. This, in turn, might have aided the company’s margins in the to-be-reported quarter.

Per the fiscal second-quarter earnings call, the company has been boosting its core Medical and Pharmaceutical Distribution and product capabilities as it continues to adapt the resilient business models for the future. Further, Cardinal Health continues to show solid progress in both its segments and supply chain work streams, and generating near and long-term efficiencies. The company’s fiscal third-quarter results are likely to reflect the impact of the same.

However, stiff competition in each of the company’s business segments is likely to have weighed on the segment margins and consequently, might have limited profitability in the fiscal third 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 -0.64%. 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 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 +0.23% and a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

DENTSPLY SIRONA Inc. XRAY has an Earnings ESP of +11.36% and a Zacks Rank of 2.

Becton, Dickinson and Company BDX has an Earnings ESP of +1.16% and a Zacks Rank of 3.

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