Here's Why You Should Invest In Cardinal Health Stock Now

Cardinal Health Inc. (NYSE:CAH) is well poised for growth backed by diversified product portfolio, acquisition-driven strategy and robust pharmaceutical segment.

Shares of Cardinal Health have gained 20.3%, compared with the industry’s growth of 3.4% on a year-to-date basis. Further, the S&P 500 Index rallied 25.2% in the same timeframe.

The company, with a market capitalization of $16 billion, is a nation-wide drug distributor and provider of services to pharmacies, healthcare providers and manufacturers. It anticipates earnings to improve 6.2% over the next five years. Moreover, it has delivered a positive earnings surprise of 16.4%, on average, in the trailing four quarters.

Additionally, the stock carries a favorable VGM Score of B. Here V stands for Value, G for Growth and M for Momentum with the score being a weighted combination of all three factors. Back-tested results have shown that stocks with a VGM Score of A or B when combined with a top Zacks Rank #1 (Strong Buy) or 2 offer best investment opportunities.

Let’s take a closer look at the factors that substantiate the company’s Zacks Rank #2 (Buy).

Factors to Bolster Cardinal Health

Cardinal Health’s Medical and Pharmaceutical offerings provide the company a competitive edge in the niche space. It offers industry expertise and an expanding portfolio of safe products.

The company follows an acquisition-driven strategy and remains committed toward investment in key growth businesses to gain market traction and bolster profits.

The company’s Pharmaceutical segment boasts of being the second largest pharmaceutical distributor in the United States. The segment’s products and services consist of pharmaceutical distribution, manufacturer and specialty services, and nuclear and pharmacy services. These in turn are anticipated to drive the company in the days ahead.

In terms of costs, Cardinal Health announced in fourth-quarter fiscal 2019 earnings call that it anticipates incremental cost savings of $130 million associated with actions intended to optimize and simplify operating model and cost structure. In the fiscal first quarter 2020, the company reaffirmed the same. In fact, the company anticipates to meet or exceed its $130 million commitment for the year primarily on the back of selling, general and administrative activities.

Which Way Are Estimates Headed?

For fiscal 2020, the Zacks Consensus Estimate for revenues is pegged at $152.92 billion, indicating an improvement of 5.1% from the year-ago period. For adjusted earnings per share, the same stands at $5.05, suggesting a decline of 4.4% from the year-ago reported figure.

Other Stocks to Consider

Some other top-ranked stocks from the broader medical space are Conmed Corporation (NASDAQ:CNMD) , West Pharmaceutical Services, Inc. (NYSE:WST) and Edwards Lifesciences Corporation (NYSE:EW) , each currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Conmed has a long-term earnings growth rate of 17%.

West Pharmaceutical has a long-term earnings growth rate of 14%.

Edwards Lifesciences has a long-term earnings growth rate of 14.8%.

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