Cardinal Health reacted very well on published financial results. Reminding, I was buying CAH not far ago, when there was uncertainty around drug prices and competitive war amongst drug distributors. So far so good performance, but let’s look on financial report.

Here if we look on financial results they were weak. How can you comment double digit decreases other than weak? Well, so why there was good positive reaction? This is all the matter of expectations. Shares were discounting more disastrous quarter and at the end of the day it was not as bad.

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As you know I try not looking at consensus, though what I note is that results were significantly weaker and this was due to generic pharmaceutical pricing and changes in product and customer mix. Medical segment business, though significantly lower, performed properly.

Although this quarter was weak (in my opinion) we can see that outlook is quite positive and expected EPS17 is between $5.40 -$5.60. Assuming middle of this guidance we obtain P/E17 = 14.2 + 2.3% dividend yield + 2.7% buyback (so together return yield to shareholders is 5%, not bad). I think that valuation is neutral / still rather low, and note that I am more than 10% in plus on my investment so far!

Long term expected growth is still quite favorable for dividend growth investors:

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Summing up, after reading some more info about financial reults I think it was a weak, though expected quarter. I see no reason to change my positive approach towards company. I am long CAH and I see no reason to change it.

 

Disclaimer: CAH – long