Cardinal Health (NYSE: NYSE:CAH) saw its price target increase to $125.00 from $115.00 by Argus, while the financial firm's stock rating was maintained at Buy.
The adjustment from Argus reflects the company's ongoing efforts to navigate through various challenges, including the impact of a significant client loss on its upcoming quarterly results.
Cardinal Health, a major U.S. distributor of pharmaceuticals and a global manufacturer and distributor of medical and laboratory products, has been grappling with difficulties in its high-margin Medical segment since the pandemic.
These issues have stemmed from an inability to pass on increased costs to customers due to long-standing distribution contracts. Additionally, the company is set to face a revenue impact in the first quarter of 2025 due to the departure of a large client, which accounted for over 15% of its revenue.
Despite these setbacks, Cardinal Health has demonstrated resilience. The firm's robust generic program has generated substantial cash flow, enabling a significant share buyback. In fiscal year 2024, Cardinal Health repurchased $750 million of its shares.
Furthermore, an acquisition made in the second fiscal quarter of 2024 is expected to bolster the company's growth strategy, focusing on higher-margin products.
The company is also navigating a national opioid settlement, agreeing to pay up to $6 billion over the next 18 years. This comes alongside the news from 2022 that activist investment firm Elliot Management has taken a large position in Cardinal Health.
In other recent news, Cardinal Health has seen significant changes in its board of directors, with members Steven K. Barg and Sujatha Chandrasekaran opting not to stand for re-election. This is in addition to the company's plans to open a new distribution center in Walton Hills, Ohio, a move aimed at enhancing infrastructure and supply chain resiliency.
Analysts from Deutsche Bank (ETR:DBKGn), TD Cowen, and Mizuho have upgraded their outlook on the company following a strong fiscal year 2024 performance, which saw a 29% increase in earnings per share and an 11% rise in revenue to $227 billion. Cardinal Health has also revised its fiscal year 2025 EPS guidance upwards to between $7.55 and $7.70, reflecting confidence in its strategic progress.
Other recent developments include the company's plans to generate at least $500 million in cash over the next two years and an increased share repurchase expectation to $750 million for FY2025.
InvestingPro Insights
Cardinal Health (NYSE: CAH) has been showing signs of strategic financial management and consistent shareholder value creation, as evidenced by the recent adjustments in its stock rating and price target. According to InvestingPro Tips, the management's aggressive share buyback strategy signals confidence in the company's future, with $750 million in shares repurchased in fiscal year 2024. Additionally, Cardinal Health has a notable track record of raising its dividend for 36 consecutive years, showcasing its commitment to returning value to shareholders.
InvestingPro Data further underlines the company's financial health and market position. With a market capitalization of $27.89 billion, Cardinal Health is trading at an adjusted P/E ratio of 17.33 for the last twelve months as of Q4 2024, indicating a potentially attractive valuation relative to its near-term earnings growth. The company's revenue has grown by 10.66% over the same period, signifying robust top-line growth. Moreover, the stock has yielded strong returns, with a 30.09% increase in the one-year price total return as of the end of 2024, and is trading near its 52-week high, at 98.55% of the peak price.
For readers interested in further insights, there are over 20 additional InvestingPro Tips available, which provide a deeper analysis of Cardinal Health's financial metrics and market performance. These tips can be accessed through the InvestingPro platform for a comprehensive understanding of the company's investment potential.
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