Cardinal Health surges on earnings beat, outlook raise, buyback
Healthcare distributor lifts FY guidance for third time, completes $750M share repurchases
Cardinal Health shares rallied Thursday after the healthcare distributor delivered a stronger-than-expected second quarter and raised its full-year outlook for the third time this fiscal year, underscoring momentum across its pharmaceutical and medical products businesses.
The company reported non-GAAP diluted earnings per share of $2.63, beating analyst estimates of $2.37 by 11.2%, while revenue climbed 19% year-over-year to $65.6 billion, slightly exceeding Wall Street projections of roughly $64.9 billion.
Cardinal Health lifted its fiscal 2026 non-GAAP EPS guidance to a range of $10.15 to $10.35, representing 23% to 26% growth and marking the third consecutive increase since the company initially set targets. The new midpoint of $10.25 exceeds the previous outlook by approximately $0.75 per share.
"We delivered another quarter of strong results, with all five operating segments achieving double-digit profit growth," said Jason Hollar, chief executive officer of Cardinal Health. "Our performance demonstrates the strength of our diversified business model and our ability to execute strategically across the enterprise."
The Pharmaceutical and Specialty Solutions segment, which accounts for the bulk of revenue, grew sales by 19% to $60.7 billion, with segment profit surging 29% to $687 million. The growth was driven by brand and specialty pharmaceutical sales performance, contributions from recent acquisitions in the medical-surgical optimization platform, and positive generics program results.
Global Medical Products and Distribution, the company's medical supplies unit, delivered a more modest but significant turnaround, with revenue increasing 3% to $3.3 billion and segment profit soaring 106% to $37 million. The dramatic profit improvement reflects cost optimization initiatives and volume growth from existing customers, partially offset by tariff impacts.
The "Other" segment—which includes at-Home Solutions, Nuclear and Precision Health Solutions, and OptiFreight Logistics—posted the strongest percentage gains, with revenue up 34% to $1.7 billion and segment profit jumping 52% to $179 million. The at-Home Solutions business benefited from the recent acquisition of Advanced Diabetes Supply, expanding the company's footprint in the rapidly growing home healthcare market.
Cardinal Health also returned significant capital to shareholders during the quarter, completing $750 million in share repurchases, including an accelerated $375 million buyback program executed in the second quarter. The aggressive repurchase activity reduced the company's diluted weighted average shares outstanding to between 237 million and 238 million, down from previous expectations of approximately 238 million.
The company reached its targeted leverage range of 2.75x to 3.25x Adjusted Debt to EBITDA, achieving 3.2x as of December 31, 2025, providing financial flexibility for continued investment in growth initiatives and shareholder returns.
Analysts have taken notice of Cardinal Health's improving trajectory. The stock recently hit a 52-week high and currently carries an average target price of $234.20, implying roughly 13% upside from current levels. Of the 17 analysts covering the stock, 12 rate it a buy or strong buy, while four recommend hold and one suggests sell, according to market data.
The healthcare distribution sector has faced pressure in recent years from pricing challenges and supply chain disruptions, but Cardinal Health's diversified portfolio and strategic acquisitions have helped it outperform peers. The company's investments in data analytics and medication management solutions are positioning it to capture growth in value-based care models that emphasize efficiency and patient outcomes.
Looking ahead, Cardinal Health raised its segment-specific profit guidance, with Pharmaceutical and Specialty Solutions now expected to grow 20% to 22% (previously 16% to 19%) and the Global Medical Products and Distribution segment projected to deliver approximately $150 million in profit (up from at least $140 million). The Other segment guidance increased to 33% to 35% growth from 29% to 31%.
The company also lowered its non-GAAP effective tax rate expectation to 21% to 23%, down from 22% to 24%, providing additional tailwinds to earnings per share.
Investors will be watching whether Cardinal Health can sustain this momentum through the remainder of fiscal 2026, particularly as the company integrates recent acquisitions and navigates ongoing supply chain challenges in the healthcare sector. The third consecutive guidance raise suggests management confidence in the underlying business strength, though macroeconomic headwinds including potential changes to healthcare policy and reimbursement rates remain overhangs for the broader industry.