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On Thursday, Citi analyst Daniel Grosslight increased the price target on Cardinal Health (NYSE:CAH) shares to $157 from the previous $140, while keeping a Neutral rating on the stock. The healthcare provider, currently trading near its 52-week high with a 41% return over the past year, shows promising momentum. According to InvestingPro analysis, the stock appears slightly undervalued based on its Fair Value estimate. The adjustment follows Cardinal Health’s latest earnings report, which the analyst described as solid, highlighting the company’s performance in various segments.
Cardinal Health’s pharmaceutical and other divisions outshone expectations, mitigating the volatility seen in the Global Medical (TASE:BLWV) Products Distribution (GMPD) segment. Despite a slight 0.4% year-over-year decline in Pharma revenue, the company’s overall performance was bolstered by a successful $10 billion onboarding of Publix and client expansions, which proceeded according to plan. The company maintains strong financial health, earning a "GREAT" overall score from InvestingPro, with particularly high marks in profit and price momentum metrics.
The pharmaceutical segment saw a 16 basis point year-over-year expansion in margins, attributed to ongoing growth in high-margin Biopharma and Managed Services Organization (MSO) solutions, as well as stability in generics. This led to a 14% year-over-year increase in Pharmaceutical (TADAWUL:2070) Adjusted Operating Income (AOI). Additionally, the company’s other areas of operation also exceeded expectations, with a 22% year-over-year growth in AOI, driven by strong performance across all solutions.
Despite the robust growth in these areas, the GMPD segment faced challenges, with AOI falling short of expectations by 14% and 16% compared to Citi’s and consensus estimates, respectively. Nevertheless, this segment still managed to grow by $17 million year-over-year.
Riding on the strength of its Pharma and Other segments, Cardinal Health has raised its Earnings Per Share (EPS) guidance by $0.18 at the midpoint. This is due to an anticipated increase in Pharma AOI growth to between 11.5% and 12.5%, and Other AOI growth to between 16% and 18%, which is expected to compensate for the narrower GMPD segment AOI projection of $130 million to $140 million.
Looking ahead to Fiscal Year 2026, Cardinal Health anticipates double-digit EPS growth, with the Pharma and Other segments expected to be the primary contributors to this growth trajectory. The company’s strong outlook is supported by its track record of 43 consecutive years of dividend payments and a healthy PEG ratio of 0.28, suggesting attractive growth potential relative to its current valuation. For deeper insights into Cardinal Health’s growth prospects and valuation metrics, investors can access comprehensive analysis through InvestingPro, which offers additional ProTips and detailed financial metrics in its Pro Research Report.
In other recent news, Cardinal Health reported first-quarter 2025 earnings that exceeded expectations, with earnings per share (EPS) reaching $2.35, surpassing the forecasted $2.17. Despite a slight revenue miss at $54.9 billion, the company raised its full-year EPS guidance, indicating a positive outlook for future growth. Cardinal Health’s performance was bolstered by strategic acquisitions and growth in its Nuclear segment. Additionally, the company completed the acquisition of Advanced Diabetes Supply Group, further expanding its business operations. Analyst firms have noted the company’s strong operating earnings growth of 21% and an EPS increase of 13% year-over-year. The company’s strategic focus on specialty and pharmaceutical solutions has shown positive results, with contributions from recent acquisitions such as GI Alliance and Integrated Oncology Network. Cardinal Health’s leadership remains optimistic about mitigating potential tariff impacts and anticipates continued robust performance across its segments.
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