Citi raises Cardinal Health stock target to $130 on Pharma strength

On Thursday, Citi analyst Daniel Grosslight increased the price target for Cardinal Health (NYSE:CAH) shares to $130 from the previous $129, while keeping a Neutral rating on the stock. The adjustment follows Cardinal Health’s recent financial performance, which Grosslight described as a "beat-and-raise quarter," driven by robust growth in its Pharma segment. According to InvestingPro data, the company, currently valued at $31.14 billion, is trading near its 52-week high of $131.29, with analysis suggesting the stock may be slightly undervalued.

Cardinal Health’s Pharma segment demonstrated resilience, with a year-over-year growth of approximately 17% in top-line revenue (excluding contributions from Optum) and around 7% in adjusted operating income (AOI), surpassing both the analyst’s and consensus estimates by 3% and 7%, respectively. The strong performance led the company to increase its Pharma segment guidance from an initial range of 4%-6% to a new range of 10%-12%. This impressive growth contributes to the company’s substantial total revenue of $224.45 billion in the last twelve months. InvestingPro subscribers can access 15+ additional insights about Cardinal Health’s financial health and growth prospects.

Grosslight pointed out that this revised guidance assumes a deceleration in organic Pharma growth from about 9% in the first half of 2025 to roughly 5% in the second half, largely due to an anticipated normalization in utilization. Despite this expected slowdown, the analyst expressed optimism about Cardinal Health’s ability to navigate a volatile macroeconomic landscape, attributing much of the year’s weakness to one-time events.

The company’s Global Medical (TASE:PMCN) Products Distribution (GMPD) segment, however, did not perform as strongly, falling $10 million short of expectations, which included a $15 million write-off. Consequently, Cardinal Health has lowered its guidance for this segment by $17.5 million, now projecting $130 to $150 million.

In his remarks, Grosslight also noted that the Other segment of Cardinal Health performed largely in line with expectations, with both revenue and AOI growing by 13% and 11% year-over-year, respectively. The company’s recent acquisitions of GIA and ION contributed to the overall positive results, helping to boost the Pharma segment’s guidance.

In other recent news, Cardinal Health has made significant strides in its financial performance and strategic initiatives. The company has raised its full-year earnings forecast for fiscal year 2025, expecting its non-GAAP EPS to reach the higher end of the previously projected range of $7.75 to $7.90, primarily driven by the robust performance of its Pharmaceutical (TADAWUL:2070) and Specialty Solutions segment.

Cardinal Health’s stock rating has been upgraded by several firms. TD Cowen analysts upgraded the rating from Hold to Buy, setting a new price target of $144, based on expectations of earnings outperformance due to new customer acquisitions and strong utilization trends. Similarly, Evercore ISI raised its rating from In Line to Outperform, with a maintained price target of $140.00, indicating potential for higher long-term guidance. BofA Securities also upgraded the stock from Neutral to Buy, adjusting the price target to $145, expecting an upside to EPS estimates.

The company has also announced plans to acquire Integrated Oncology Network for $1.1 billion and is planning to acquire the majority equity interests in The GI Alliance Holdings, LLC, and Advanced Diabetes Supply Group. To partially finance these acquisitions, Cardinal Health successfully raised $2.9 billion through a public offering of senior notes. Furthermore, T2 Biosystems (NASDAQ:TTOO) has licensed its sepsis detection technology following a commercial agreement with Cardinal Health, aiming to improve patient outcomes and reduce healthcare costs.

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