Cardinal Health (NYSE: CAH) saw its shares climb to an all-time high on Tuesday, following the release of a fiscal 2027 earnings forecast that surpassed Wall Street expectations. The medical distributor projected adjusted earnings per share (EPS) in the range of $12.40 to $12.60 for the fiscal year ending June 2027, with a midpoint of $12.50. This figure is 3.8% above the consensus estimate of $12.04 compiled by LSEG, according to Reuters.
The stock advanced 3.6% to $245.64 during morning trading, reflecting investor optimism about the company's growth trajectory. However, a closer look at the numbers reveals a more nuanced picture. The company's 13%-15% growth projection is calculated off an adjusted earnings base that excludes a one-time tariff reimbursement, which added $0.31 to fourth-quarter adjusted EPS. When measured against reported fiscal 2026 earnings, the midpoint growth rate is approximately 11%.
Quarterly Performance and Segment Highlights
Cardinal Health's fiscal fourth-quarter results were mixed. Revenue came in at $63.67 billion, missing the $65.03 billion consensus, but adjusted EPS of $2.91 beat expectations by 20.2%. Excluding the tariff recovery, adjusted EPS would have been $2.60, still a 7.4% beat. The company reported a 6% increase in revenue and a 70% jump in GAAP EPS, which rose to $1.70 from $1.00 in the prior-year quarter.
The pharmaceutical and specialty solutions segment, which accounts for 92% of revenue, delivered a 6% revenue increase and a 21% profit growth, outpacing sales growth by a factor of three. The global medical products and distribution segment saw a 2% revenue decline, attributed to lower volumes and anticipated repayments of refunds to clients, but profit growth was credited to the same tariff recovery. Other businesses posted a 7% revenue increase and 14% profit growth.
CEO Commentary and Strategic Moves
Chief Executive Jason Hollar described fiscal 2026 as "a standout year" for Cardinal Health, noting that all five operating segments achieved double-digit profit growth before considering tariff recoveries. The company is also expanding its direct-to-consumer home-care footprint through acquisitions, including the purchase of Strive Medical and AdaptHealth Corporation's (NASDAQ: AHCO) diabetes unit for approximately $360 million.
Cardinal Health's board has approved an additional $5 billion for its share buyback program, bringing the total authorization to $6.4 billion. Management expects to allocate around $700 million toward capital expenditures in fiscal 2027.
Cash Flow Outlook and Analyst Reactions
Adjusted free cash flow for fiscal 2026 was $5.0 billion, but the company's forecast for fiscal 2027 is between $3.5 billion and $4.0 billion, with a midpoint of $3.75 billion—a 25% decline. This decrease is due to an elevated base in the previous year. The company's guidance for pharmaceutical revenue growth of 3%-5% lags the fourth-quarter's 6%, while pharma profit growth of 8%-11% is lower than the 21% recorded in the quarter.
Analysts have responded to the news with mixed price target adjustments. Citigroup maintains a Buy rating with a $265 target, while Baird has an Outperform rating with a $251 target. Mizuho and Evercore ISI both have Outperform ratings with $240 targets, and JPMorgan holds a Neutral rating with a $215 target. The consensus analyst target prior to the results was $252.40, representing a 2.8% premium to Tuesday's price.
Industry Comparison and Risks
Cardinal Health's underlying profit growth of 25% in the latest quarter outpaces its major competitors. McKesson Corporation (NYSE: MCK) reported 20% EPS growth, while Cencora, Inc. (NYSE: COR) posted 12%. McKesson led in revenue growth at 8%, followed by Cardinal at 6% and Cencora at 5.1%.
Despite the positive outlook, risks remain. Demand for specialty products could ease, generic price levels may soften, and integration costs from acquisitions could weigh on margins. The repayment of tariffs is still uncertain, and ongoing federal probes and potential loss of customer contracts add further uncertainty.
Hollar expressed confidence entering fiscal 2027, but analysts now face the challenge of reconciling a streamlined earnings growth midpoint of 14.2% with a projected 25% decline in adjusted free cash flow. The revised target will likely drive the next move in the stock.
