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What's in Store for Cardinal Health's (CAH) Q2 Earnings?

Zacks Equity Research

Cardinal Health, Inc.’s CAH second-quarter fiscal 2019 results are scheduled for release on Feb 7, before market opens. While results are likely to show impressive growth in the core Pharmaceutical segment, headwinds in the Medical-Gloves sub-segment are likely to mar prospects.

Fiscal Q1 Results at a Glance

In the last reported quarter, Cardinal Health delivered first-quarter fiscal 2019 adjusted earnings of $1.29 per share, which beat the Zacks Consensus Estimate of $1.06. Adjusted earnings increased 18% year over year.

Revenues increased 7.9% on a year-over-year basis to $35.21 billion and beat the Zacks Consensus Estimate of $33.54 billion.

Cardinal Health has an average positive earnings surprise of 9.3% for the trailing four quarters.

Which Way Are Q2 Estimates Treading?

For the quarter to be reported, the Zacks Consensus Estimate for earnings is pegged at $1.09 per share, reflecting a year-over-year decline of 16.8%. The same for revenues is pinned at $36.3 billion, indicating growth of 3% from the year-ago quarter.

Let’s see how things are shaping up prior to the earnings release.

Pharmaceutical to Drive Fiscal Q2

Cardinal Health’s Pharmaceutical segment is the second largest pharmaceutical distributor in the United States. The segment's products and  services comprise pharmaceutical distribution, manufacturer and specialty services as well as nuclear and pharmacy services, which are expected to majorly drive second-quarter results.

In the last reported quarter, the segment accounted for 89.2% of net sales. Revenues at the segment increased 8.6% to $31.42 billion on a year-over-year basis.

However, it is encouraging to note that, for the quarter to be reported, the Zacks Consensus Estimate for the unit’s revenues stands at $31.92 billion, reflecting a year-over-year rise of 2.5%.

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 see notable contributions from its Medical unit. For investors’ notice, the segment manufactures products such as single-use surgical drapes, gowns and apparel, exam and surgical gloves, etc., which are likely to boost sales in the quarter to be reported.

In the last reported quarter, the unit contributed 10.8% to net sales. Sales at the segment improved 2.1% year over year to $3.80 billion.

For the quarter to be reported, the Zacks Consensus Estimate for the unit’s revenues stands at $4.08 billion, mirroring a year-over-year rise of 1%.

However, Cardinal Health’s lackluster expectations from its exam-gloves segment are concerning. Notably, in the last reported quarter, commodity pricing, inflation and supply disruptions created headwinds for the segment.

What Does Our Model Say?

Per our proven model, a stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to deliver a positive earnings surprise in the quarter. However, this is not the case here.

Earnings ESP: Cardinal Health has an Earnings ESP of 0.00%. 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 revision.

Stocks Worth a Look

Here are a few medical stocks worth considering as they have the right combination of elements to post an earnings beat this quarter.

Masimo Corporation MASI has an Earnings ESP of +1.04% and a Zacks Rank #3.

Quidel Corporation QDEL has an Earnings ESP of +5.26% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Becton, Dickinson and Company BDX has an Earnings ESP of +0.49% and a Zacks Rank #2.

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