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.