Investors should be actively accumulating shares of Cardinal Health Inc., after the prescription drug distributor reported better-than-expected earnings in the fiscal first quarter, said a Sterne Agee analyst who raised his rating and price target on the stock.
Analyst Greg T. Bolan said in a Wednesday morning research note that Cardinal generated strong operating earnings in the quarter, despite a revenue challenge from the loss of a contract with the drugstore chain Walgreen Co.
"The fact that this contract loss had little to no impact on operating results speaks to (Cardinal) management's strong cost control acumen, in our view," Bolan wrote.
The Dublin, Ohio, company reported last week fiscal first-quarter earnings that jumped 25 percent and exceeded expectations. Cardinal also raised its fiscal 2014 earnings forecast to a range of between $3.62 and $3.72 per share, which was higher than the average analyst forecast.
Bolan raised his rating on the stock to "Buy" from "Neutral" and his price target on the shares to $73 from $59. He also increased his fiscal 2014 and 2015 earnings estimates.
Bolan's note said his firm, Sterne Agee, expects to receive or intends to seek compensation for investment banking work from Cardinal. His compensation isn't tied to his recommendations or views.
Cardinal shares closed at $60.56 on Tuesday, and the price has climbed nearly 9 percent since the Oct. 31 earnings report. The stock hit a 52-week high of $61.87 on Monday.