Cardinal Health on Tuesday showed why the healthcare distributor belongs in our portfolio, delivering robust full-year earnings guidance that trumped some imperfections in the final quarter of its fiscal 2026. Revenue for the three months ending June 30 increased nearly 6% year over year to $63.67 billion, missing expectations of $65.03 billion, according to LSEG. Adjusted earnings per share (EPS) came in at $2.60, ahead of the $2.42 consensus estimate compiled by LSEG. The 18-cent earnings beat excludes a 31-cent per share benefit from tariff refunds paid by the U.S. government. Shares of Cardinal Health rose more than 1% Tuesday, setting a fresh record close. Its all-time closing high of $239.71 was set on July 7. Cardinal’s stock had spiked earlier in Tuesday’s session, reaching as high as $258.30, before the gains faded. We’re chalking that retreat up to nothing more than profit-taking, considering those levels represented all-time intraday highs. Cardinal’s previous intraday peak came on Aug. 6, at $244.01 a share. Its all-time closing high of $239.71 was set further back on July 7. While we understand the desire to book profits at record levels, we still like the stock because the profit growth is there. Not only did Cardinal’s earnings grow nicely in the reported fourth quarter, but its EPS outlook for fiscal 2027 implies growth above its long-term guidance range. CAH YTD mountain Cardinal’s year-to-date stock performance. Bottom line This was not the cleanest quarter, evidenced by the revenue miss. Nevertheless, the results and guidance demonstrated Cardinal’s enhanced profitability as the company pushes into high-margin areas like specialty pharmaceuticals, direct-to-patient delivery of healthcare supplies, and owning the business side of specialty medical practices. There’s a lot more to Cardinal Health these days than its legacy business distributing drugs and medical supplies to hospitals and retail pharmacies — though that part of the company is still important to the financials. While the headline numbers had some benefit from tariff refunds — thanks to the Supreme Court overturning the Trump administration’s “liberation day” duties — a quick look under the hood makes clear that strong execution and increased operating efficiency are what really drove Cardinal’s quarter. Rather than dwell on the top-line miss, we’re instead focusing on the company’s ability to generate strong free cash flow and deliver materially better-than-expected profits in spite of the revenue headwinds. This is true in both the June quarter and the outlook for fiscal 2027, which started last month. The results in the company’s largest segment, Pharmaceutical and Specialty Solutions — where we find U.S. pharmaceutical and consumer products distribution results — showed the benefit of Cardinal Health’s volume-based, fee-for-service operating model for branded drug distribution. This allowed the company to turn in better-than-expected profits…
Read More: We’re lifting our price target on Cardinal Health after issuing rosy profit
