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What's in Store for Cardinal Health (CAH) in Q3 Earnings?

Zacks Equity Research

Cardinal Health, Inc.’s CAH third-quarter fiscal 2019 results are scheduled for release on May 9, before the opening bell.

In the last reported quarter, the company delivered a positive earnings surprise of 18.4%. Further, it has an average four-quarter positive surprise of 10.2%.

Let’s take a look at how things are shaping up prior to this announcement.

Which Way Are Q3 Estimates Treading?

For the to-be-reported quarter, the Zacks Consensus Estimate for earnings is pegged at $1.43 per share, indicating an improvement of 2.9% from the year-ago quarter. The same for revenues stands at $35.14 billion, suggesting growth of 4.5% from the year-ago reported figure.

Pharmaceutical to Drive Fiscal Q3

Cardinal Health’s Pharmaceutical segment is the second largest pharmaceutical distributor in the United States. The company is likely to witness revenue growth at Pharmaceutical segment in the to-be-reported quarter fueled by probable sales growth from pharmaceutical distribution and specialty customers. Better-than-expected performance at this segment is likely to drive the company’s third-quarter fiscal results.

It is encouraging to note that, for the quarter to be reported, the Zacks Consensus Estimate for the unit’s revenues stands at $31.95 billion, suggesting a rise of 7.5% from the year-ago quarter.

Cardinal Health, Inc. Price and EPS Surprise


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

Other Factors at Play

Cardinal Health expects to witness notable contributions from its Medical unit. Notably, the segment manufactures products such as single-use surgical drapes, gowns and apparel, exam and surgical gloves, which will bolster sales in the to-be-reported quarter.

For the quarter to be reported, the Zacks Consensus Estimate for the unit’s revenues stands at approximately $4 billion, indicating an improvement of 2% from the prior-year quarter.

Further, the Cardinal Health’s acquisition-driven strategy and diversified product portfolio are likely to contribute to the company’s overall performance in the to-be-reported quarter.  

However, Cardinal Health might experience 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 pose a threat to the margins of such segments. This in turn might put pressure on the company’s profitability in the to-be-reported quarter. 

What Our Quantitative Model Suggests

Our proven model clearly indicates that a stock needs to have both — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — to deliver a positive earnings surprise. This is the case here.

Earnings ESP: Cardinal Health has an Earnings ESP of +1.13%. 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.

Please note that we caution against stocks with a Zacks Rank #4 (Sell) or 5 (Strong Sell) going into the earnings announcement, especially when the company is seeing negative estimate revisions.   

Other Stocks Worth a Look

Here are some other stocks worth considering from the broader medical space as these too have the right combination of elements to beat on earnings this time around.

NanoString Technologies, Inc. NSTG has an Earnings ESP of +3.08% and a Zacks Rank #3.

Aurora Cannabis Inc. ACB has an Earnings ESP of +55.88% and a Zacks Rank #3.

STERIS plc STE has an Earnings ESP of +0.35% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

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