Cardinal Health, Inc. (NYSE:CAH): Stock of the Day

by David Fessler, Advisory Panelist, Investment U

When we think of industrial suppliers, W.W. Grainger (NYSE:GWW) is one of the largest in the business. From nuts and bolts to janitorial supplies, it’s a good bet

Grainger’s can supply it. The company consolidates parts, equipment and supplies from thousands of manufacturers and provides customers with one-stop shopping, both on its website and from its huge four inch thick catalog.

Grainger’s has been bucking the trend and doing reasonably well during this business contraction. However it did acknowledge that business conditions in 2009 will be challenging, and its first quarter sales will be significantly lower than last quarter.

As dismal as that sounds Grainger should be one of the first to benefit from the upswing when it comes. Motors, fans, bearings and a host of other parts used in industrial and manufacturing environments still break, wear out and need to be replaced.

I’ve written about the company in more detail on several occasions in this space, and you can read my articles here. I still believe it is a good addition to any long-term well-balanced energy and infrastructure portfolio.

But did you know that there’s a Grainger-like company that serves the healthcare industry? Cardinal Health, Inc. (NYSE:CAH) is an $87 billion global manufacturer, supplier and distributor to the healthcare industry.

Cardinal makes over 50,000 critical customer deliveries every day. Its 40,000 customers – located on five continents – include medical centers, hospitals, retail and mail order pharmacies, health clinics and numerous other healthcare providers.

Cardinal is so big, 33% of all delivered medical products, drugs, and laboratory supplies pass through the company’s supply chain.

It also is the largest source for special nuclear pharmaceutical drugs. It delivers more than 13 million doses annually to outpatient facilities and hospital nuclear medicine departments.

The company has grown both organically and through acquisitions, completing two of them in 2008.

And while spending delays by hospitals in 2009 have prompted the company to lower its current year outlook, it chalked up some impressive results for its fourth fiscal quarter:

Net income jumped to 93 cents a share from 90 cents a year ago. Revenue was up 7.8% to $25.1 billion, slightly beating analyst’s estimates.

Chairman and Chief Executive R. Kerry Clark remarked that he is seeing the first signs of  credit markets beginning to thaw, and that has him cautiously optimistic: “Despite a very challenging economic climate, we had solid growth from both of our primary operating segments.”

As a result, Cardinal reaffirmed its 2009 full year guidance, and claims it expects full-year top-line growth of 6-7%.

In the face of an uncertain economy, a global healthcare supplier like Cardinal might be a good choice for those wishing to establish a solid footing, in what is likely to be a tumultuous year for investing.

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