Cardinal Health: A Steady Hold Amid Moderate Growth and Diversification Efforts

Bank of America Securities analyst Allen Lutz has maintained their neutral stance on CAH stock, giving a Hold rating on May 6.

Allen Lutz has given his Hold rating due to a combination of factors that suggest a steady yet moderate growth prospect for Cardinal Health. The company’s core pharmaceutical distribution business is expected to maintain a reliable low-single-digit growth, particularly in the non-specialty sector, while the specialty segment is poised for more robust double-digit expansion. Management’s confidence in the 4-6% segment profit growth is supported by consistent market dynamics and a stable demand in generics. Furthermore, Cardinal Health’s diversified supply chain mitigates potential risks from proposed tariffs on imports, which could affect some medical supplies from China, indicating a resilient operational strategy.
The company’s ongoing Global Medical Products and Distribution (GMPD) improvement plan is on track, aiming to hit segment targets by FY24 with inflation mitigation efforts nearing completion. The “Other” segment also shows promise with strong demand across various divisions like Nuclear and OptiFreight, driven by secular trends and industry leadership. These factors, combined with ongoing investments, are expected to contribute to the 8-10% long-term segment profit growth. Consequently, Lutz’s Hold rating reflects a balance between the company’s solid execution and improvement initiatives against a backdrop of moderate growth expectations, with a price objective set at $115 based on a 15x CY24 P/E ratio.

In another report released on May 6, Deutsche Numis also maintained a Hold rating on the stock with a $110.00 price target.

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Cardinal Health (CAH) Company Description:

Cardinal Health, Inc. is a healthcare services and products company, which engages in the provision of customized solutions for hospitals, healthcare systems, pharmacies, ambulatory surgery centers, clinical laboratories and physician offices. It also provides medical products and pharmaceuticals and cost-effective solutions that enhance supply chain efficiency. The company operates through the following segments: Pharmaceutical and Medical. The Pharmaceutical segment distributes branded and generic pharmaceutical, specialty pharmaceutical and over-the-counter healthcare and consumer products. The Medical segment manufactures, sources and distributes cardinal health branded medical, surgical and laboratory products. The company was founded by Robert D. Walter in 1979 and is headquartered in Dublin, OH.