On the September 2 episode of Mad Money, Jim Cramer called Cardinal Health, Inc. (NYSE:CAH) one of his “absolute favorites” and mentioned its growing exposure to specialty pharmaceuticals and higher-margin healthcare services.
Cardinal’s been running circles around McKesson and Cencora. They consistently put up the best numbers because this company has gradually become less of a commoditized service provider and more of a specialized player.
Cardinal Health Earnings and Fiscal 2027 Guidance
Cardinal Health, Inc.’s (NYSE:CAH) fiscal fourth-quarter revenue rose 6% to $63.7 billion but missed estimates, while adjusted earnings per share came in at $2.91. Excluding a $0.31 per share tariff refund benefit, adjusted EPS was $2.60. Management forecast fiscal 2027 non-GAAP EPS of $12.40 to $12.60, a 13% to 15% growth, while adjusted free cash flow is expected at $3.5 billion to $4 billion.
The revenue miss is less significant if the company continues converting pharmaceutical volume into earnings. Lower branded-drug prices, including those affected by Medicare negotiations, can reduce reported sales without a proportional decline in distributor fees. The shift toward generics can have a similar effect because lower-priced drugs generate less revenue but can support attractive margins and high volumes. As Cramer said:
Remember, volume is where Cardinal really makes the money, volume, okay? That’s why I keep shrugging off the revenue misses.
The company is also moving beyond traditional distribution. Its Other segment, which includes Nuclear and Precision Health Solutions, OptiFreight Logistics and at-Home Solutions, is expected to produce 11% to 13% revenue growth and 15% to 18% profit growth in fiscal 2027. Cardinal agreed in July to acquire AdaptHealth’s diabetes health business and Strive Medical for approximately $360 million, expanding its at-home medical-supply operations.
Cardinal Health Faces Drug Pricing and Valuation Risks
The main risk is execution. Cardinal Health, Inc. is forecasting 13% to 15% adjusted EPS growth for fiscal 2027, but the stock has already rerated close to its record high. If specialty growth slows, drug-pricing changes put greater pressure on distributor fees, or margins fall short of expectations, the shares could face a sharper valuation reset than they would have at their earlier, lower multiple. Customer concentration adds another vulnerability. CVS Health accounted for 28% of Cardinal’s fiscal 2026 revenue, while its five largest customers represented 43%, leaving earnings exposed to major contract losses or pricing concessions.
Furthermore, valuation is a second concern as it has a forward P/E of 19.01. The cash-flow outlook also requires attention: fiscal 2027 adjusted free cash flow of $3.5 billion to $4 billion would be below the roughly $5 billion generated in fiscal 2026.
Cardinal Health Institutional Ownership and Short Interest
Insider Monkey tracks more than 1,000 hedge funds, and its data showed that 63 hedge funds held CAH in the second quarter, down from 66 in the first quarter. Additionally, short interest remains low at about 2.7% to 2.8% of the float. Cramer’s thesis rests on earnings growth rather than a defensive-sector trade alone.
Here’s the bottom line: In a world where investors are terrified of higher oil and higher interest rates, I think a stock like Cardinal Health can be a big winner. This company’s been doing very well lately, and the stock hasn’t gotten enough credit for it. But now, we finally have a backdrop that makes Cardinal too attractive to ignore.
With fiscal 2027 EPS growth targeted at 13% to 15%, Cardinal Health, Inc. has a credible case for its current valuation. But after the stock’s substantial rerating, investors will need management to deliver.
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