Cardinal Health raises full-year profit forecast, tops estimates

Cardinal Health (CAH) increased its FY24 adjusted EPS guidance to $8.15-$8.20, exceeding analyst estimates of $8.14, and projected FY26 adjusted EPS of $9.10-$9.30, representing 13% growth. The company reaffirmed its long-term adjusted EPS CAGR target of 12%-14% from FY26-FY28 and anticipates generating at least $10 billion in adjusted free cash flow over the next three years, while also raising its baseline share repurchase plans to at least $750 million per year.

Analysis

Cardinal Health (CAH) has issued a positive update to its financial outlook, raising its full-year adjusted earnings per share (EPS) forecast for the current fiscal year to a range of $8.15 to $8.20. This represents an increase from the previous guidance of $8.05 to $8.15 and surpasses the average analyst consensus of $8.14. The announcement led to a modest 0.5% rise in CAH shares during pre-market trading. Furthermore, the company introduced preliminary guidance for fiscal year 2026, projecting adjusted EPS between $9.10 and $9.30, indicating a 13% growth at the midpoint compared to the revised current year outlook. Cardinal Health also reaffirmed its long-term adjusted EPS compound annual growth rate (CAGR) target of 12% to 14% for fiscal years 2026 through 2028 and elevated its long-term profit growth target for its Pharmaceutical and Specialty Solutions segment to a normalized 5% to 7%. Financially, the company expects to generate substantial liquidity, with at least $10 billion in total adjusted free cash flow projected over the next three years, and has increased its baseline share repurchase plans to a minimum of $750 million annually. These developments, shared ahead of an Investor Day where further details on growth strategies and capital allocation are anticipated, signal strengthening earnings power and a continued commitment to returning capital to shareholders, with the company confirming its capital allocation framework will remain unchanged.

Key Decisions for Investors

• Investors should view the upward revision in EPS guidance and robust long-term growth targets as positive indicators of Cardinal Health's operational strength and earnings trajectory.
• The commitment to generating at least $10 billion in adjusted free cash flow over three years, coupled with an increased share repurchase program of at least $750 million annually, signals enhanced potential for shareholder returns and could offer valuation support.
• Close attention should be paid to the upcoming Investor Day for detailed insights into management's growth strategies, execution plans, and further elaboration on the updated long-term financial outlook, which will be critical for assessing the sustainability of these projections.