CareFusion's Technologies Meet Health Care Needs

NEW YORK (TheStreet) -- There are hundreds of hospital across America and around the world that need specific kinds of products and services. Perhaps the most important ones they're buying involve minimizing procedural errors and maximizing patient satisfaction.

Companies that help hospitals to meet and conform to the health care insurance industry's standards of reimbursable products and procedures have a bright future in the current global increase in people needing medical treatments.

That's why CareFusion ( CFN) last week released quarterly earnings that were both strong and bodes well for the year ahead. CFN beat the Street's consensus estimate and added 1.6% to the company's gross operating margin.

Jim Cramer, the co-portfolio manager of Action Alerts PLUS and the host of CNBC's "Mad Money" recently interviewed the CEO of CFN and the video is well worth watching. You'll learn the company has a very active mergers and acquisitions pipeline and is in expansion mode.

Here's an example of the kind of product CareFusion makes that hospital surgery rooms can hardly live without: On Tuesday the company launched a "take-apart laparoscopic scissor." This is in addition to its lineup of other precision, take-apart surgical instruments.

The press release mentions that these kind of surgical instruments "... provide sterile, sharp blades and a new insulated shaft for each procedure. Designed for easy assembly and disassembly, the scissors feature an ergonomic, reusable ring-handle that also fits Snowden-Pencer take-apart clamps, dissectors and graspers. The handle is designed to more evenly distribute pressure than traditional handles and accommodates a variety of hand positions for comfort and precision during surgery.

"To ensure the new scissors meet customer requirements, CareFusion conducted a limited market release to test the scissors in surgical procedures. After evaluation by more than 30 surgeons who performed approximately 60 procedures, the scissors received high levels of customer satisfaction and 100% of surgeons who evaluated the product indicated they would recommend it to peers."

Jim Cramer and Stephanie Link actively manage a real money portfolio for his charitable trust -- enjoy advance notice of every trade, full access to the portfolio, and deep coverage of the latest economic events and market movements.

Now here's where the rubber meets the road. If the surgeons and surgical assistants in an operating room will give tacit or direct approval of the efficacy of these products, sales are likely to soar. Apparently that's the kind of response CFN is receiving from professionals who have used its products.

"The new Snowden-Pencer laparoscopic scissors are very modular, so we can adjust a tray as we see fit to create a very cost-effective approach to our surgeries," said Dr. Ryan Tyner, a bariatric surgeon at Lovelace Westside Hospital in Albuquerque and Fellow of the American College of Surgeons. "I prefer to use the best instruments for my patients, and my personal opinion is that this is the best line on the market."

That should make CFN shareholders smile with the same level of enthusiasm as the company's many product representatives. I also learned that for more than 50 years, Snowden-Pencer instruments from CareFusion have offered the medical community exceptional levels of performance and longevity.

This harkens back to the days when CFN was a division of Cardinal Health ( CAH), which spun CareFusion off in 2009. CAH is a stock to watch. This $108 billion company headquartered in Dublin, Ohio, is in the business of improving the cost-effectiveness of health care in general. It also pays a 2.4% dividend!

Back to CFN: The company also makes and develops market-leading technologies including infusion pumps, automated dispensing systems, ventilation and respiratory products, and services for data-mining surveillance. It has an extensive line of critically needed "interventional medicine" products.

In the company's own words, "No patient, procedure or physician is the same, which is why CareFusion offers a full range of clinically relevant product choices for interventional procedures. Our products and services for interventional procedures are designed to meet individual patient needs and help physicians deliver positive clinical outcomes using minimally invasive and percutaneous techniques.

"As an innovator in interventional medicine technologies, CareFusion offers unique products in a growing number of areas, including drainage, vertebral augmentation, biopsy and other diagnostic procedures."

With such a diverse portfolio no wonder its profits are outstanding!

Below is the kind of one-year chart an investor likes to see, both price-wise as well as CFN's trailing-twelve-month operating margin. It's almost picture perfect and when you take into consideration its most recent quarter's year-over-year earnings growth of 13.7%, you can see why the market likes CFN.

CFN Chart CFN data by YCharts

Its forward (one-year) PE ratio is less than 14, which suggests the stock price has room to run. That said, the price per share has come a long way (up over 23%) since its Nov. 16, 2012, intraday low of $26.34. Remember that CFN doesn't pay a dividend yet, but that could change as its levered free cash flow rises above the current level of almost $611 million.

Investors may be prudent to consider accumulating shares on the inevitable pullbacks and market down days. Along with its former parent Cardinal Health, CareFusion is a company that knows how to meet the medical and health care market's needs and to "ring the register" while doing so.

At the time of publication the author had no position in any of the stocks mentioned.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

Make smarter trading decisions and provide investment ideas that could help make you richer. Bryan Ashenberg does the dirty work so you don't have to!

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