Can Cardinal Health (CAH) Bring On A Beat In Q3 Earnings?

Dublin, OH-based Cardinal Health (NYSE:CAH) , a global player in the healthcare services and products space, is set to report third-quarter fiscal 2017 results on May 1, before the bell.

Last quarter, the company posted earnings of $1.34 per share, which surpassed the Zacks Consensus Estimate by 10 cents. Notably, on average, Stryker beat the Zacks Consensus Estimate by almost 4.74% over the last four quarters. Let’s see how things are shaping up prior to this release.

Why a Likely Positive Surprise?

Our proven model shows that Cardinal Health is likely to beat estimates because it has the right combination of the two key ingredients.

Zacks ESP: Cardinal Health’s Earnings ESP stands at +0.69%. This is because the company’s Most Accurate estimate is $1.34 while the Zacks Consensus Estimate is pegged at $1.24. A favorable ESP serves as a meaningful indicator of a likely positive surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Cardinal Health currently has a Zacks Rank #3 (Hold). Note that stocks with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 have a significantly higher chance of beating earnings estimates. Conversely, Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement.

The combination of Cardinal Health’s favorable Zacks Rank and positive ESP makes us reasonably confident of a beat.

Factors at Play

Cardinal Health is banking on acquisitions, strategic buyouts, joint ventures and supply agreements to drive growth. Furthermore, the aging population presents significant growth opportunity for the company. On the flip side, Cardinal Health expects generic sales to remain sluggish in the near term. Further, generic pricing pressure remains a concern.

We are also upbeat on Cardinal Health’s expansion plans in Asia. The company continues to believe that China presents significant growth opportunities. Furthermore, growth in new and existing customer count is likely to boost earnings. The company expects its fiscal 2017 adjusted earnings per share from continuing operations in the range of $5.35 to $5.50. The outlook represents growth of approximately 2% to 5% from the prior fiscal year.

A glimpse at the price performance of the stock over the past three months reveals a return of almost 7.13%. The stock’s current return also compares favorably with the S&P 500’s return of 5.53% over the same time. In fact, with a long-term expected earnings growth rate of 7.43%, the stock has solid potential for further appreciation.

Stocks to Consider

Here are three companies you may want to consider as our proven model shows that they have the right combination of elements to post an earnings beat this quarter:

Proteostasis Therapeutics (NASDAQ:PTI) has an Earnings ESP of +5.17% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

BioCryst Pharmaceuticals, Inc. (NASDAQ:BCRX) has an Earnings ESP of +31.58% and a Zacks Rank #2.

Hill-Rom Holdings, Inc. (NYSE:HRC) has an Earnings ESP of +1.27% and a Zacks Rank #2.

The Best & Worst of Zacks

Today you are invited to download the full, up-to-the-minute list of 220 Zacks Rank #1 ""Strong Buys"" free of charge. From 1988 through 2015 this list has averaged a stellar gain of +25% per year. Plus, you may download 220 Zacks Rank #5 ""Strong Sells."" Even though this list holds many stocks that seem to be solid, it has historically performed 6X worse than the market. See these critical buys and sells free >>