Bear Stearns upgraded its investment rating on shares of Cardinal Health (CAH) to outperform from peer perform.
Analyst Raymond Falci says the company's core business has likely troughed in the near term. Falci sees a re-acceleration of the company's existing businesses on the back of customer wins, branded price inflation, and a potential organic acceleration in its PTS business. He sees a rebound in third-quarter operating income to 18% growth from 14% in the second. The analyst notes the company's strong business diversification. He believes overstated pharmaceutical market concerns have sent Cardinal shares to a historic low valuation; Falci notes the stock has traded below 15 times forward earnings three times in the past 15 years, each time accompanied by gains of at least 52% and 66% in the ensuing 6 to 12 months. He has a $75 price target on the stock.