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

BofA Securities analyst Allen Lutz reiterated the Buy rating on Cardinal Health, Inc. CAH, raising the price forecast from $165 to $170.

Lutz noted that Cardinal Health is set to host its investor day in New York on June 12, where the company will offer an updated business outlook compared to its last investor event two years ago.

With strong performance over the past two years and favorable industry dynamics—such as rising utilization and IRA-driven out-of-pocket cost changes—expectations are elevated.

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Lutz anticipates that the company will lay out a roadmap toward sustained double-digit EPS growth and may also revise its Pharmaceutical and Specialty Solutions EBIT growth outlook upward.

Additionally, management is expected to share updates on its recent investments in specialty areas, including Specialty Networks and its MSO platform, and provide insight into future growth prospects and consolidation opportunities.

Lutz projects Cardinal Health to lift its long-term Pharmaceutical EBIT growth target from the current 4–6% range to 5–7% or possibly 5–8%, supported by both favorable industry conditions and internal execution. While investors have historically viewed Cardinal's pharma growth as lagging behind peers like McKesson (6–8% target) and Cencora (5–8% target), those views may be outdated.

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According to Lutz, Cardinal's prior scale disadvantage in specialty is diminishing, and its relatively smaller size means that recent M&A activity could have a more significant growth impact compared to larger competitors.

Lutz projects Cardinal Health to offer an updated perspective on the growth path of its Global Medical Products and Distribution segment during the investor day, including steps taken to offset tariff impacts, momentum in its branded product portfolio, evolving demand trends, and its position relative to competitors.

Growth in the company's Other segment has also been solid, and Lutz sees potential for sustained high-single-digit EBIT growth in that area. Additionally, the analyst anticipates Cardinal Health will continue maintaining a balanced capital allocation strategy, combining selective acquisitions, share buybacks, and ongoing debt reduction.

Price Action: CAH shares are trading higher by 0.42% to $153.72 at last check Wednesday.

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