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What's in the Cards for Cardinal Health (CAH) in Q1 Earnings?

Zacks Equity Research

Cardinal Health, Inc.’s CAH first-quarter fiscal 2020 results are scheduled for release on Nov 7, before the opening bell.

In the last reported quarter, the company delivered a positive earnings surprise of 19.4%. Further, it has an average four-quarter positive surprise of 17.7%.

Let’s take a look at how things are shaping up prior to this announcement.
 
What do the Q1 Estimates Say?

For the to-be-reported quarter, the Zacks Consensus Estimate for earnings is pegged at $1.09 per share, indicating a decline of 15.5% from the year-ago quarter. The same for revenues stands at $36.98 billion, suggesting growth of 5% 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 Q1

Cardinal Health’s Pharmaceutical segment is the second largest pharmaceutical distributor in the United States. Probable sales growth from pharmaceutical distribution and specialty customers is anticipated to get reflected in the Pharmaceutical segment’s first-quarter bottom line. Better-than-expected performance at this segment is likely to have driven the company’s  first-quarter results.

Notably, for the fiscal first-quarter, the Zacks Consensus Estimate for the unit’s revenues stands at $33.07 billion, suggesting growth of 5.3% from the year-ago quarter.

Moreover, positive impact from Specialty Solutions, higher contribution from brand sales and mix, and benefit derived from the cost savings initiatives are likely to have contributed to the segment’s profits.

Other Factors at Play

Cardinal Health’s Medical unit is likely to have contributed significantly to the overall third-quarter performance. In fact, the segment manufactures products such as single-use surgical drapes, gowns and apparel, exam and surgical gloves, which is likely to have bolstered 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 anticipate these to reflect on the fiscal first-quarter results.

During the fiscal fourth quarter 2019 earnings call, management announced that it estimates an incremental $130 million in cost savings in fiscal 2020 related to actions intended to optimize and simplify the company's operating model and cost structure.

Further, the Cardinal Health’s acquisition-driven strategy and diversified product portfolio are likely to have contributed to the company’s overall fisrt-quarter performance.  
 
However, Cardinal Health is likely to have experienced 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 get reflected in the segment margins and consequently might impede profitability in the first 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 the case here.

Earnings ESP: Cardinal Health has an Earnings ESP of +0.69%. 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.

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 +0.55% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Neovasc Inc. NVCN has an Earnings ESP of +16.87% and a Zacks Rank #3.

ShockWave Medical, Inc. SWAV has an Earnings ESP of +3.55% and a Zacks Rank #3.

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Neovasc Inc. (NVCN) : Free Stock Analysis Report
 
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Cardinal Health, Inc. (CAH) : Free Stock Analysis Report
 
ShockWave Medical, Inc. (SWAV) : Free Stock Analysis Report
 
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