Why Cardinal Health Is My Favorite Healthcare Stock (Even After The Recent Price Decline)

Cardinal Health (CAH) stock fell nearly 10% on October 28th. The next day markets were open (October 31st), the company’s stock gained 4%.

This level of volatility is unusual for any stock… And Cardinal Health is no ordinary stock. The company is very stable.

Cardinal Health was founded in 1971. It is one of the 3 largest pharmaceutical distributors in the United States.Together, the ‘Big 3’ have around an 85% market share.

Note: AmerisourceBergen (ABC) and McKesson (MCK) are the other two.

Cardinal Health has increased its dividend payments for 31 consecutive years. It is no small feat to have increased dividends every single year for 3 decades.

The company is a member of the exclusive Dividend Aristocrats Index, which is comprised of just 50 S&P 500 stocks with 25+ years of consecutive dividend increases.

Cardinal Health’s stock price collapse on October 28th because rival McKesson released weak quarterly numbers. The company saw its revenue grow just 2%. Adjusted earnings-per-share fell 7%. McKesson shares fell over 23% on the day of the announcement.

On October 31st, Cardinal Health released its quarterly numbers…

Keep reading this article to learn more about the investment prospects of Cardinal Health.

Cardinal Health’s Quarterly Numbers

Cardinal Health’s most relevant quarterly numbers are below:

Obviously, 14% top line growth is very good. This is in direct contrast to McKesson’s 2% revenue increase.

Adjusted earnings-per-share declines of 10% are not good.  The primary driver of the earnings-per-share decline is increased competition amongst the ‘Big 3’. A price war is breaking out.

AmerisourceBergen appears to be the instigator of the price war. The company is lowering prices to gain market share. Cardinal Health’s 14% revenue increase shows the company is not afraid to match AmerisourceBergen. McKesson, however, has not followed.