On Wednesday, TD (TSX:TD) Cowen analysts revised their stance on Cardinal Health (NYSE:CAH), elevating the stock from a Hold to a Buy rating. Accompanying this upgrade is a new price target set at $144, an increase from the previous target of $130.
The upgrade is grounded in the expectation that Cardinal Health will outperform current earnings projections thanks to new customer acquisitions, strong utilization trends, and recent mergers and acquisitions in specialty services. With a market capitalization of $29.4 billion and an "GREAT" Financial Health score according to InvestingPro, Cardinal Health appears well-positioned for growth.
Analysts at TD Cowen anticipate that these factors will contribute to an adjusted earnings per share (EPS) growth for Cardinal Health that surpasses market consensus. They estimate that by fiscal year 2026, the company's adjusted EPS growth could reach 14%, compared to the consensus of 11% and management's long-term growth guidance of 12-14%.
InvestingPro data reveals that Cardinal Health has maintained dividend payments for 43 consecutive years, demonstrating consistent financial stability. The company's stock generally trades with low price volatility, making it an attractive option for steady growth investors.
The raised price target to $144 suggests an approximate 20% upside from current levels, reflecting TD Cowen's confidence in Cardinal Health's growth prospects. This optimism is based on the belief that the company's Pharmaceutical (TADAWUL:2070) segment will achieve growth beyond its long-term target of 4-6%.
The analysts' commentary underscores the potential that recent strategic moves, including mergers and acquisitions in specialty services, have created for Cardinal Health. These developments are expected to enable the company to tap into higher growth rates and capitalize on the expanding opportunities in the healthcare sector.
Cardinal Health's stock rating upgrade and the raised price target by TD Cowen signal a positive outlook for the company's financial performance in the coming years. The analysts' projections hinge on the company's ability to leverage new customer relationships and the anticipated benefits from its strategic initiatives in specialty services.
In other recent news, Cardinal Health has been the subject of multiple analyst upgrades. Evercore ISI raised its rating from In Line to Outperform, maintaining a price target of $140.00, while BofA Securities upgraded the stock from Neutral to Buy, adjusting the price target to $145.
Both firms cited potential upside to earnings per share (EPS) estimates. Moreover, Mizuho (NYSE:MFG) Securities initiated coverage on Cardinal Health shares, recommending an Outperform rating and setting a price target of $139.
In terms of mergers and acquisitions, Cardinal Health has announced plans to acquire Integrated Oncology Network for $1.1 billion and is also planning to acquire the majority equity interests in The GI Alliance Holdings, LLC, and Advanced Diabetes Supply Group. To partially finance these acquisitions, the company successfully raised $2.9 billion through a public offering of senior notes.
Other recent developments include T2 Biosystems (NASDAQ:TTOO) licensing its sepsis detection technology following a commercial agreement with Cardinal Health. The company also reported an increase in EPS and adjusted free cash flow expectations for fiscal year 2025, despite a 4% decrease in total revenue. This positive financial performance is largely attributed to the company's operations, particularly in the Pharmaceutical and Specialty Solutions segment.
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