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Cardinal Health (CAH) spun-off 81% its clinical and medical products segment, CareFusion Corp. (CFN) in August 2009, hence an asset-adjusted CAH review is in order. Look for CAH's 2010 revenue to increase 3.5-5%, boosted by increased prescription sales, lower customer attrition, and better performance of wider-margin generic drugs.
On the downside, customer contract repricings will likely result in less-favorable agreements, but that's not enough to blot-out the generally positive story, hence I'm reiterating my buy rating for the company's share, first recommended on April 17, 2009, at a pre-spin-off price of $34.22. However, investors should look for a dip before purchasing shares.
The First Call FY2010/FY2011 EPS estimates for CAH are $2.02 to $2.22.
Technically, Cardinal Health's stock has been in an an uptrend since the spin-off. However, near-term, the stock may have to digest those gains, so Buying on dip is preferred.
Finally, the Sell/Stop Loss has been lowered to $17 from $26, to reflect the spin-off.
2010 Outlook: Cardinal Health is a long-term play. Don't buy CAH if you're looking to close your position by the end of 2010, as the 1-year risk/return is not favorable.
Stock Analysis: Cardinal Health is a moderate-risk stock. If you've already purchased the company's shares, hold them. If not, consider buying a 25% position in CAH now. Under any circumstance, don't buy more than 50% of your CAH position before March 2010. Revised sell/stop loss if you bought shares in this company: $17.
Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
The First Call FY2010/FY2011 EPS estimates for CAH are $2.02 to $2.22.
Technically, Cardinal Health's stock has been in an an uptrend since the spin-off. However, near-term, the stock may have to digest those gains, so Buying on dip is preferred.
Finally, the Sell/Stop Loss has been lowered to $17 from $26, to reflect the spin-off.
2010 Outlook: Cardinal Health is a long-term play. Don't buy CAH if you're looking to close your position by the end of 2010, as the 1-year risk/return is not favorable.
Stock Analysis: Cardinal Health is a moderate-risk stock. If you've already purchased the company's shares, hold them. If not, consider buying a 25% position in CAH now. Under any circumstance, don't buy more than 50% of your CAH position before March 2010. Revised sell/stop loss if you bought shares in this company: $17.
Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
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