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Cardinal Health Stock Double Downgraded on Report, Competition

Bank of America double-downgraded Cardinal Health after it issued a weaker-than-expected earnings forecast. The stock is lower.
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Cardinal Health  (CAH)  shares dropped on Thursday after the pharmaceutical distribution major issued a weaker-than-expected earnings forecast and Bank of America double-downgraded the stock to underperform.

BofA cuts its price target to $56 from $69.

The stock recently traded at $51.17, down 13%, leaving it down 9% over the past six months.

For fiscal 2022, Cardinal predicted adjusted profit from continuing operations of $5.60 to $5.90 a share, below analysts’ forecast of $6.16.

“The company’s guidance was a mix of operational headwinds, incremental investments that were unexpected, and a less aggressive capital deployment plan than we would have assumed vs. the company’s available cash flow,” analyst Michael Cherny wrote, according to Bloomberg.

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He said Cardinal Health competitors AmerisourceBergen  (ABC) and McKesson  (MCK)  are better positioned to take advantage of strong market demand. And it will take time for Cardinal to reestablish confidence among investors, he said

Cardinal, along with those two competitors, last month joined with drug giant Johnson & Johnson in a $26 billion settlement to end thousands of lawsuits filed by state governments over the opioid overdose crisis.

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Cardinal, McKesson and AmerisourceBergen will pay a combined $21 billion while Johnson & Johnson will pay $5 billion, with an extra $1 billion being paid by distributors to New York state.

In May, Cardinal reported fiscal-third-quarter results that missed Wall Street expectations and narrowed its full-year guidance.

Cardinal Health posted net income of $119 million, or 40 cents a share, a third of the $350 million, or $1.19 a share, of the year-earlier quarter.