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Tickers in this Article: CAH, ABC, MCK
We maintain our recommendation on Cardinal Health (CAH) at Neutral. Earnings per share from continuing operations for the fourth quarter of fiscal 2012 of 73 cents beat the Zacks Consensus Estimate by a penny. Earnings per share of $3.21 for the fiscal also surpassed the Zacks Consensus Estimate by a cent. Net income from continuing operations (as reported) were up about 14% year over year to $236 million (or 68 cents a share) in the reported quarter. Revenues in the fourth quarter stood at $26.8 billion, flat on a year-over-year basis, trailing the Zacks Consensus Estimate of $27.1 billion. The Pharmaceutical segment, Cardinal's mainstay, posted revenues of $24.3 billion. The 1% year over year decrease was due to brand-to-generic conversions. Sales from the smaller Medical segment improved 5% year over year to $2.4 billion, on the back of higher sales of preferred offerings.

For fiscal 2013, Cardinal expects its adjusted earnings per share from continuing operations in a band of $3.35 and $3.50.

Cardinal Health is ranked among the Fortune 500. With over $100 billion in annual sales, Cardinal Health remains one of the largest distributors of pharmaceuticals and medical supplies in the U.S. Its diversified product portfolio may partly insulate it from the current economic uncertainty.

The company stands to gain from the gradual shift in mix from bulk to the higher-margin non-bulk sector of the Pharmaceutical segment. It is also riding the generic wave. Overall, Cardinal has benefited from a spate of tuck-in acquisitions and capital deployment strategies.

However, the company faces tough competition across all its business segments, which may continue to pressure pricing and margins. Its major competitors in the pharmaceutical supply chain segment include McKesson Corp. (MCK) and AmerisourceBergen Corp. (ABC).

The stock currently retains a Zacks #4 Rank, which translates into a short-term Sell recommendation.

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