Cardinal Health Analyst Flags Fading Scale Gap, Sees Rising Edge in Specialty Growth

BofA Securities reiterated a Buy rating on Cardinal Health (CAH), raising the price target to $170 from $165 ahead of the company's investor day on June 12th. Analyst Allen Lutz anticipates Cardinal Health will raise its long-term Pharmaceutical and Specialty Solutions EBIT growth target from the current 4-6% range, potentially to 5-7% or even 5-8%, citing favorable industry dynamics and internal execution. Management is also expected to provide updates on specialty investments, tariff mitigation, and its balanced capital allocation strategy, including acquisitions and share buybacks.

Analysis

BofA Securities has reiterated its Buy rating on Cardinal Health (CAH) and increased its price target to $170 from $165, signaling positive expectations for the company's upcoming investor day on June 12th. Analyst Allen Lutz anticipates Cardinal Health will announce an upward revision to its long-term Pharmaceutical and Specialty Solutions EBIT growth target, potentially from the current 4–6% range to as high as 5–8%, supported by strong performance over the past two years, favorable industry dynamics including rising healthcare utilization and IRA-driven out-of-pocket cost changes, and effective internal execution. This expected revision, which would align CAH more closely with peer targets (McKesson at 6–8% and Cencora at 5–8%), suggests that historical perceptions of Cardinal's pharma growth lagging competitors may be outdated. Management is also expected to outline a strategy for sustained double-digit EPS growth, provide updates on investments in specialty areas such as Specialty Networks and its MSO platform, discuss future growth and consolidation opportunities, and detail measures for mitigating tariff impacts within its Global Medical Products and Distribution segment. Furthermore, Lutz highlights that Cardinal's prior scale disadvantage in specialty is diminishing, and M&A could significantly impact growth due to its relatively smaller size, while the 'Other' segment is also projected for high-single-digit EBIT growth. The company is anticipated to maintain a balanced capital allocation strategy involving selective acquisitions, share buybacks, and debt reduction. CAH shares reflected this optimism, trading higher by 0.42% to $153.72.

Key Decisions for Investors

• Investors should consider the reiterated Buy rating and increased price target as a positive signal, potentially warranting a review of existing positions in Cardinal Health ahead of expected positive catalysts from the investor day.
• Closely monitor Cardinal Health's June 12th investor day for specific guidance on Pharmaceutical EBIT growth targets, updates on specialty investments, tariff mitigation strategies, and capital allocation plans, particularly acquisitions and share buybacks, as these will be key determinants of future stock performance.
• Assess the company's execution on its articulated strategy to achieve sustained double-digit EPS growth and close any perceived growth gap with peers, as success in these areas could lead to a positive re-rating of the stock.