Cardinal Well being CAH gave buyers lots to love in its fiscal fourth-quarter report this week, sending shares to a document excessive of $258 as Wall Road digests one other earnings beat and an encouraging fiscal 2027 outlook.
The Dividend Aristocrat’s quarterly gross sales got here in beneath expectations, however that was overshadowed by stronger-than-anticipated profitability, double-digit projected earnings development, and a large enhance to its share-repurchase authorization.
With Cardinal Well being additionally increasing a number of higher-growth companies, the post-earnings setup stays compelling even after a powerful run that has lifted CAH 12% yr so far and almost 150% during the last three years.
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Cardinal Well being Tops This fall EPS Expectations
Cardinal Well being closed FY26 on a robust observe, reporting This fall adjusted earnings of $2.91 per share, which surged 40% from a yr in the past and crushed EPS expectations of $2.42 by 20%. This was aided by greater working earnings, tariff refunds, a decrease tax price, and a diminished share depend.
That mentioned, the earnings beat wasn’t completely attributable to the tariff profit. Excluding the roughly 31-cent-per-share affect from tariff refunds, adjusted EPS would have been about $2.60, nonetheless comfortably above expectations.
Income offered a extra combined image. Cardinal’s This fall gross sales elevated 6% yr over yr to $63.67 billion, however missed consensus estimates of $65.61 billion by 3%. Nonetheless, Pharmaceutical and Specialty Options income rose 6%, benefiting from development from present clients and favorable generics efficiency. Conversely, World Medical Merchandise and Distribution gross sales declined 2%, reflecting decrease distribution volumes and anticipated tariff-refund repayments to clients.
For the complete fiscal yr, Cardinal Well being generated $254.25 billion in income, up 14% YoY, whereas adjusted EPS surged greater than 36% to $11.26.
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CAH’s FY27 Earnings Outlook Steals the Present
Arguably essentially the most bullish a part of Cardinal Well being’s report was administration’s preliminary FY27 outlook.
CAH expects adjusted EPS of $12.40-$12.60, representing roughly 10-12% development. It’s additionally noteworthy that the EPS steerage represents 13%-15% development from an adjusted FY26 earnings baseline of $10.95 per share that excludes the one-time tariff-refund profit.
Extra importantly, that outlook was properly above Wall Road’s consensus FY27 EPS forecast of $12.18 (Present Qtr beneath).
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The steerage additionally exceeds administration’s longer-term EPS development framework, offering one other indication that current operational momentum is not merely the results of momentary advantages.
Progress is anticipated throughout a number of components of the enterprise. Pharmaceutical and Specialty Options income is projected to extend 3%-5% in FY27, accompanied by 8%-11% phase revenue development. World Medical Merchandise and Distribution gross sales are forecasted to rise 2%-4%, whereas its assortment of different companies is anticipated to provide income development of 11%-13%.
The latter consists of companies equivalent to At-Dwelling Options and OptiFreight Logistics, whereas current acquisitions are increasing Cardinal Well being’s publicity to higher-growth areas of healthcare. The lately acquired Attempt Medical enterprise and introduced acquisition of AdaptHealth’s Diabetes Well being operations are anticipated to provide significant contributions to development.
A Large New Buyback Provides to the Bull Case
Extra intriguing is that Cardinal Well being’s bettering earnings outlook is being accompanied by aggressive capital returns.
The board approved an extra $5 billion for share repurchases, bringing CAH’s whole remaining repurchase authorization to roughly $6.4 billion. Administration expects to repurchase at the very least $1 billion of inventory throughout FY27 after shopping for again roughly $1.35 billion throughout FY26.
That’s notably noteworthy given Cardinal Well being’s rising profitability. Repurchasing shares reduces the excellent share depend and may present an extra enhance to per-share earnings, complementing the underlying development of a enterprise.
Increasing share repurchase authorizations additionally demonstrates administration’s confidence in money technology whereas leaving room for strategic investments and tuck-in acquisitions. Somewhat than counting on a single lever to create shareholder worth, Cardinal Well being is balancing natural funding, M&A, dividends, and share repurchases.
This comes as Cardinal Well being has elevated its dividend for 29 consecutive years, with an annual yield approaching 1%, and its 20% payout ratio suggests there may be loads of room for future dividend hikes.
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Backside Line: CAH Nonetheless Seems Like a Purchase
Cardinal Well being’s This fall report wasn’t excellent. Income missed expectations, and a part of the quarterly earnings upside stemmed from a one-time tariff refund. These elements deserve consideration, notably with CAH buying and selling close to document territory.
Nonetheless, the broader image appears to be like significantly extra engaging.
Adjusted earnings nonetheless exceeded This fall EPS expectations after eradicating the tariff profit; administration’s $12.40-$12.60 FY27 EPS outlook requires 13%-15% underlying development and got here in properly above consensus forecast, and a number of other of Cardinal Well being’s companies are positioned for additional enlargement. Add a $6.4 billion whole share-repurchase authorization and at the very least $1 billion of deliberate FY27 buybacks, and there are a number of potential drivers of EPS development.
Buying and selling at what remains to be an affordable 19X ahead earnings a number of, CAH presently sports activities a Zacks Rank #2 (Purchase), together with an general “A” VGM Zacks Model Scores grade for the mixture of Worth, Progress, and Momentum.
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Cardinal Well being, Inc. (CAH) : Free Inventory Evaluation Report
This text initially printed on Zacks Funding Analysis (zacks.com).
The views and opinions expressed herein are the views and opinions of the writer and don’t essentially replicate these of Nasdaq, Inc.
