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CAH Stock Rises More Than 13% YTD: Should You Buy, Hold or Sell?
CAHCardinal Health(CAH) ZACKS·2025-03-27 14:05

Core Insights - Cardinal Health's pharmaceutical segment shows resilience and growth, driven by strong demand for brand, specialty, and generic pharmaceuticals, with significant revenue contributions from GLP-1 medications and specialty distribution [1][2] - The company is strategically focusing on expanding its specialty pharmaceutical business, which is expected to capitalize on industry trends favoring high-value therapeutics [2][7] - The GMPD segment has improved significantly, with a year-over-year profit increase of approximately 240million,indicatingsuccessfulturnaroundefforts[3][8]FinancialPerformance−CardinalHealth′sshareshavedeclinedby7.2240 million, indicating successful turnaround efforts [3][8] Financial Performance - Cardinal Health's shares have declined by 7.2% year-to-date, compared to a 4% decline in the industry and a 4.6% decrease in the S&P 500 Index [4] - Analysts have raised earnings estimates for fiscal years 2025 and 2026, indicating expectations of continued business improvement [10] Strategic Initiatives - The company aims to achieve a GMPD segmental profit target of 300 million by fiscal year 2026, focusing on cost containment and productivity enhancements [8] - Cardinal Health has identified opportunities to unlock at least 500millionincashflowoverthenexttwoyearsthroughworkingcapitalimprovementsandbusinesssimplifications[9]Long−TermGrowthDrivers−Strategicacquisitions,suchasGIAllianceandION,areexpectedtodrivelong−termgrowthandstrengthenCardinalHealth′spositioninhigh−margintherapeuticareas[7][13]−Thecompany′scapitalallocationstrategyincludesa500 million in cash flow over the next two years through working capital improvements and business simplifications [9] Long-Term Growth Drivers - Strategic acquisitions, such as GI Alliance and ION, are expected to drive long-term growth and strengthen Cardinal Health's position in high-margin therapeutic areas [7][13] - The company's capital allocation strategy includes a 750 million share buyback commitment for fiscal 2025, balancing acquisitions and disciplined share repurchases [14] Market Challenges - Cardinal Health faces temporary revenue headwinds due to customer contract transitions, particularly the expiration of a major contract with Optum Rx [15] - Rising healthcare costs and operational expenses, especially in the GMPD segment, have pressured margins, although inflation mitigation efforts have been somewhat effective [16][17] Competitive Positioning - The company is leveraging specialty networks, logistics solutions, and supply-chain technologies to maintain a competitive edge in pharmaceutical distribution [17][18] - Despite challenges from COVID-19 vaccine-related revenue declines, Cardinal Health's diversified revenue base and focus on specialty pharmaceuticals position it for long-term stability and growth [18]