Cardinal Health's adjusted earnings of $0.83 for fiscal
2014-fourth-quarter rose 5.1% from $0.79 a year-ago and topped the
Zacks Consensus Estimate by $0.02. However, revenues fell 9.9% to
$22,894 million. Despite lower revenues, earnings rose due to lower
operating expenses during the quarter. Performance in the
Pharmaceutical segment continued to be disappointing due to the
expiration of the contract with Walgreens. The company projects
fiscal 2015 adjusted EPS to rise 6.8 to 12.0% over fiscal 2013 to
$4.10 to $4.30. The company's leverage position has also improved.
As such, we maintain our Neutral recommendation and set a target
price of $77.00.
Cardinal Health, Inc. (CAH), headquartered in Dublin, OH, is a
nation-wide drug distributor and provider of services to
pharmacies, healthcare providers and manufacturers. It enables
pharmacies, hospitals, and ambulatory care sites to focus on
patient care while reducing costs and enhancing efficiency and
quality. As one of the largest global health care companies,
Cardinal Health is an important link in the health care supply
chain. It provides pharmaceuticals and medical products to more
than 40,000 locations daily. It is also a leading manufacturer of
medical and surgical products, including gloves, surgical apparel,
and fluid management products. In addition, Cardinal Health
supports the growing diagnostic industry by supplying medical
products to clinical labs and operating a large network of
radiopharmacies that dispense products to aid in the early
diagnosis of disease. Cardinal Health has two reporting segments
Pharmaceutical and Medical.
The Pharmaceutical segment (accounted for 88.0% of revenues in
fiscal 2014): It is the second largest pharmaceutical distributor
in the U.S. and the largest nuclear pharmacy. Its products and
services include pharmaceutical distribution, manufacturer and
specialty services, and nuclear and pharmacy services. In China,
the segment operates as Cardinal Health China, which supplies
branded, generic and specialty pharmaceuticals and provides
logistics, marketing and other services. This segment also offers
"specialty pharmaceutical products and services", which supplies
(1) oncology, rheumatology, urology and other pharmaceutical
products to physician offices (2) human plasma products and
specialty pharmaceutical products to hospitals and other healthcare
providers (3) consulting and other services to pharmaceutical
manufacturers, third party payors and healthcare providers. These
apart the specialty business operates as a specialty pharmacy.
The Medical segment (12.0%): The segment manufactures products
such as single-use surgical drapes, gowns and apparel exam and
surgical gloves and fluid suction and collection systems and offers
sterile and non-sterile procedure kits. These products are sold
directly or distributed via third-party sources in the U.S.,
Canada, Europe, South America and the Asia/Pacific.
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