Wednesday's IBD 50 Stock to Watch pick is a leading health stock forming a flat base near a buy point. Cardinal Health is No. 2 in its industry group and just hit a new high on its relative strength line.
The Dublin-Ohio based provider offers a vast array of health care services and medical supplies to hospitals, labs, pharmacies and long-term care facilities. Cardinal serves almost 90% of all U.S. hospitals, 60,000 U.S. pharmacies and 130 nuclear pharmacies.
The company operates in more than 35 countries, with more than 10,000 specialty physician offices and clinics. It boasts more than 4,500 manufacturing partners in the health care supply chain.
Cardinal Health's at-home solutions cover 3.4 million patients with over 46,000 health care products while the Outcomes digital ecosystem supports a network of more than 23 million patients.
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Health Stock Relative Strength Surges
Cardinal Health is second in the Medical-Wholesale Drug & Supplies group. The group is ranked 20th out of the 197 IBD groups. The CAN SLIM investing system looks for companies in the top 20 IBD industries to find outperforming growth stocks.
It is also on the IBD Leaderboard's Leaders and Stock Near A Buy Point lists.
The health stock has an impressive 97 Relative Strength Rating, meaning it has outperformed 97% of the stocks in the IBD database. It also holds a respectable 94 Composite Rating.
On the flip side, its less-than-stellar 73 EPS Rating is weighed down by erratic earnings growth in the last year.
CAH stock is forming a choppy flat base and trading within 6% of a 72.38 buy point on the MarketSmith chart. Shares have previously exited a 16-week cup base with a buy point of 64.63.
The relative strength line just hit a new high as indicated by the blue dot on the weekly chart. However, the stock dipped below its 21-day exponential moving average support line on Wednesday.
New CEO At The Helm
Jason Hollar took the reins as CEO on Sept. 1, replacing Mike Kaufman. Hollar previously held the Chief Financial Officer's role.
Cardinal recently announced a collaboration with PayrHealth. The company, a full-service payor-provider relationship manager, will provide contract and management services.
The partnership aims to help physicians simplify payor contracting and maximize financial performance. The alliance will focus on rheumatology and ophthalmology services, with plans to expand to other therapeutic areas in the future.
Shares ticked up 0.7% on very heavy volume following the Sept. 16 news.
Health Stock Mixed Earnings
Cardinal missed fiscal Q4 2022 EPS expectations on Aug. 11 but beat sales expectations. Management reaffirmed its fiscal 2023 EPS guidance of $5.05 to $5.40 per share in September.
11% sales growth for the June-ended quarter marked a decline from 14% in the March-ended quarter.
Analysts are forecasting just 3% earnings growth in 2023 but a more robust 18% in 2024. Cardinal is expected to post Q1 2023 earnings on Nov. 4.
The company pays a 2.9% annualized dividend yield to shareholders.
Mutual funds own 55% of CAH shares, with 1,807 funds owning the stock in September, down from 1,840 in June.
