Healthcare services and products company Cardinal Health (NYSE:CAH)’s shares are up by more than 10% year-to-date but are down by more than 8% since early September. Cramer discussed the firm’s share price performance in his morning appearance on September 15th and wondered whether the weakness was due to a rotation into AI stocks rather than weak performance by the firm:
“I think that what’s happened is this that, when I speak to the executives off camera, when I do that, every time, I think they just felt that the rotation into all that stuff that yesterday people fled is so strong that the only place that they could really go to sell things, would be at, you would sell a Medtronic, you would sell a Thermo, you would sell out a Danaher. The only one that wasn’t doing really well in that period was Danaher, that was a good source of funds. These other companies were doing really well. You know, Carl, the amount of money that was going into anything data center was so strong, that if we see any flow back whatsoever to any of these other areas, I mean Cardinal Health is down four today, now it’s down three and a half, I would call that stupid. Cardinal Health had a great quarter, it went to two fifty and change when it reported. These are the companies I’m far more interested than I am in refilling my semiconductor lot. . .”
Cardinal Health’s fiscal fourth quarter earnings reported in August saw the firm’s profit per share of $2.91 and full year 2027 profit per share guidance of $12.40 to $12.60 beat analyst estimates of $2.91 and $12.04. The demand for branded and specialty drugs helped the firm’s pharmaceutical business, which grew revenue by 6% annually to $55.4 billion.
Yet, the firm’s Q4 revenue of $63.67 billion missed analyst estimates of $65.03 billion. On the profitability front, Cardinal Health’s pharma business grew its profit by 21% to $645 million. With an overall strong performance, the only headwinds can occur from the Inflation Reduction Act’s drug pricing charges and EPS normalization from the boost received by tariff refunds in the fourth quarter. Cardinal Health’s management has also cautioned to be ready for normalization, with CEO Jason Hollar commenting at the Morgan Stanley 24th Annual Global Healthcare Conference:
“A few reasons why, specialty at 25% growth for us, that is really strong volume. Part of that driven by the M&A, part of that driven by some new customer conquests. Those are the types of things that are going to happen at a lower rate going forward and why we think it is more prudent to have a more normalized type of growth rate.”
As for Danaher Corporation (NYSE:DHR), the shares have struggled when compared to Cardinal Health, as they are down by more than 7% year-to-date. There are several reasons behind the firm’s poor performance. For instance, Danaher Corporation (NYSE:DHR)’s second quarter earnings appeared to be solid on the surface, with profit per share beating analyst estimates. However, the firm also deferred $100 million in revenue from Q2 and Q3 to fiscal 2027 and cut the high end of its full year revenue growth to 4% from 6%. With one main narrative driver in the biotech sector being spending recovery, Danaher Corporation disappointed on the wrong metric.
Looking at the valuation, Danaher Corporation’s forward P/E ratio of 22.47 is higher than Cardinal’s 18.48. So is the hedge fund interest, with 108 funds having held a stake in the firm compared to CAH’s 63 in Q2. However, short interest as a percentage of float is higher for CAH at 3.34% compared to Danaher Corporation’s 1.54%.
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