Bottom Line Inc

April 26, 2017 | Cardinal Health Inc. | CAH


This week’s Stock of the Week has been held back because of news affecting its entire industry. But it has a wide reach and a partnership with a successful retailer that should help it bounce back.

Distributing Wellness

Cardinal Health Inc. (CAH) is one of only three very large US companies running distribution networks for medicines. Although the company is well-run, the stock has come under pressure, along with others in health care, because of fears of price clampdowns for medicines. But even if the price pressure increases, and even if that causes some tightening of Cardinal’s profit margins, the company should retain enough pricing flexibility to keep ahead of rising costs and continue to grow its substantial revenue and its profitability.

The company distributes drugs plus medical, surgical and laboratory products to retailers, hospitals, ambulatory surgery centers, clinical labs and other healthcare providers. As the main supplier to CVS Caremark, Cardinal has an important tie-in to a huge retail pharmacy network.

Revenue was $121.5 billion in fiscal 2016 and should rise to $130 billion in fiscal 2017 and $138 billion in fiscal 2018. The dividend of $1.80/share/yr. recently yielded 2.19% and appears secure.

Fiscal year: June. Earnings per share: 2018 est./$5…2017 est./$4.50…2016/$4.32.

This Week’s Expert

Bill Staton, CFA, is chairman, Staton Financial Advisors, LLC, Charlotte, North Carolina, which manages $121 million.

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