Cardinal Health is getting pummeled on mixed results — here's our plan for stock

An important development from the financial markets: Shares of Cardinal Health are taking a hit on Thursday after the drug distributor reported mixed quarterly results. We're not buyers of the dip just yet. Revenue for the three months ending March 31 increased 11% year over year to $60.

94 billion, missing expectations of $61. 7 billion, according to LSEG. Adjusted earnings per share (EPS) came in at $3.

Economic Details

79 consensus estimate compiled by LSEG. CAH 1Y mountain Cardinal Health 1-year return Bottom line Good, not great, is how Jim Cramer described Cardinal Health's performance during Thursday's Morning Meeting . While sales missed the mark across all three operating segments, overall profitability was strong — except for the Global Medical Products and Distribution segment, where Cardinal's tariff exposure lies — and free cash flow was three times the Street's consensus estimate.

On the call with investors, CFO Aaron Alt said fluctuations in the sales mix between GLP-1s, IRA changes, and generics weighed on Pharmaceutical and Specialty Solutions segment revenues, while Global Medical Products and Distribution sales were held back by lower distribution volumes. In addition, the team raised its outlook for full-year earnings. However, only 13 cents of the 50-cent increase at the midpoint is attributable to improved operational performance, with the remainder attributable to taxes, share repurchases, and interest/other expenses.

Still better than Street expectations, just not by as much. So, where do we stand now? Obviously, we wish we hadn't initiated Cardinal in early March, ahead of the quarter.

Analyst Views

However, hindsight is 20/20, and the only thing that matters now is where the stock is going. At $190 apiece, shares are trading at about 16 times estimates for fiscal year 2027, which ends in June 2027. That puts us on the lower end of the roughly 15-21 times range we've seen over the past year, and the lowest we've seen since October of last year.

We still wouldn't rush into the stock, which is down more than 6% and hovering around the 200-day moving average, a key support level we want to see hold. As members know, we value fundamentals far more than technicals, but understanding that the stock is in a precarious technical position helps to see why patience is warranted. Notably, with today's move, the stock's RSI (relative strength index) has crossed into oversold territory.

In other words, there's a lot of pessimism baked into the stock. As a result, we are trimming our price target to $225 from $260. For now, we're maintaining our 1 rating as we let the dust settle around the print and dig deeper into the sell-off.

Financial markets are tracking the development closely as investors assess the likely impact.