Cardinal Health Nears Buy Point Ahead Of Earnings

Cardinal Health (CAH) is Thursday’s pick for IBD 50 Growth Stocks To Watch, as the health stock nears a buy point ahead of earnings next week.

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Cardinal Health stock was recently added to the elite IBD Big Cap 20 list. The health company distributes drugs, manufactures medical and lab products, and provides data solutions to health care facilities. The Dublin, Ohio-based company serves nearly 90% of U.S. hospitals and more than 60,000 pharmacies.

It also ranks first out of seven stocks in IBD’s wholesale drug and supply group. Over the last four weeks, the group rose to rank No. 15 out of the 197 industry groups that IBD follows, up from its previous spot at No. 29. The CAN SLIM investing system looks for companies in the top 20 IBD industries to find outperforming growth stocks.

Cardinal Health: In A Base And Near A High

CAH stock is in a skewed cup-with-handle base with a 94.37 buy point, according to MarketSmith pattern recognition. The health stock sits  above its 21-day exponential moving average and 50-day moving average, although the 50-day line has flattened recently.

The health stock tapped its all-time high on Aug. 15, following the company’s fiscal fourth-quarter earnings report, but reversed sharply and closed near the day’s low. CAH stock undercut its 50-day line on the drop. Its Aug. 15 high started the new base, which formed lower than the previous base — not ideal.

CAH stock plunged 4.4% on Aug. 17 in heavy volume, following news that Blue Shield of California dropped CVS Health (CVS) as its benefit manager for drug pricing in favor of a collaboration that includes Amazon (AMZN). The news rattled a number of health care stocks, including UnitedHealth (UNH) and Walgreens Boots Alliance (WBA).

Then Cardinal Health shares reversed course in early October for a nine-day winning streak that reclaimed the 50-day line and formed the right side of the cup.

The relative strength line for Cardinal Health hit a 52-week high as shown by a blue dot on MarketSmith charts. CAH stock has climbed around 21% this year, outperforming the S&P 500’s 8% gain.

Earnings Growth Shows Positive Trend

In August, Cardinal Health reported higher-than-expected fiscal Q4 profit and sales and raised its fiscal 2024 revenue outlook.

“We enter the new fiscal year with momentum and are raising our previously communicated fiscal year 2024 EPS guidance,” Chief Executive Jason Hollar said in the company’s earnings release.

The health company reported accelerating earnings growth of 48% for the period that ended in June, markedly higher than previous quarters. Growth was 20% in the March quarter and 4% for December, with a 7% drop for the period before that. Meanwhile, sales growth has held steady at 13% for each of the last four quarters.

Cardinal is scheduled to report its fiscal first-quarter results on Nov. 3. The company predicts full-year fiscal 2024 earnings of $6.50 to $6.75 a share. Analysts forecast 15% fiscal 2024 profit growth to $6.68 a share and 13% to $7.55 a share in 2025, according to MarketSmith data.

CAH stock holds a near-perfect 98 IBD Composite Rating. In addition, Cardinal Health has an impressive 6 Earnings Stability Rating, showing consistent and stable earnings in the last three to five years.

Follow Kimberley Koenig for more stock market news on X/Twitter @IBD_KKoenig.

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