Cardinal Health CAH gave investors plenty to like in its fiscal fourth-quarter report this week, sending shares to a record high of $258 as Wall Street digests another earnings beat and an encouraging fiscal 2027 outlook.
The Dividend Aristocrat's quarterly sales came in below expectations, but that was overshadowed by stronger-than-anticipated profitability, double-digit projected earnings growth, and a sizable increase to its share-repurchase authorization.
With Cardinal Health also expanding several higher-growth businesses, the post-earnings setup remains compelling even after an impressive run that has lifted CAH 12% year to date and nearly 150% over the last three years.
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Cardinal Health Tops Q4 EPS Expectations
Cardinal Health closed FY26 on a strong note, reporting Q4 adjusted earnings of $2.91 per share, which surged 40% from a year ago and crushed EPS expectations of $2.42 by 20%. This was aided by higher operating earnings, tariff refunds, a lower tax rate, and a reduced share count.
That said, the earnings beat wasn't entirely attributable to the tariff benefit. Excluding the approximately 31-cent-per-share impact from tariff refunds, adjusted EPS would have been about $2.60, still comfortably above expectations.
Revenue presented a more mixed picture. Cardinal’s Q4 sales increased 6% year over year to $63.67 billion, but missed consensus estimates of $65.61 billion by 3%. Still, Pharmaceutical and Specialty Solutions revenue rose 6%, benefiting from growth from existing customers and favorable generics performance. Conversely, Global Medical Products and Distribution sales declined 2%, reflecting lower distribution volumes and anticipated tariff-refund repayments to customers.
For the full fiscal year, Cardinal Health generated $254.25 billion in revenue, up 14% YoY, while adjusted EPS surged more than 36% to $11.26.
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CAH's FY27 Earnings Outlook Steals the Show
Arguably the most bullish part of Cardinal Health's report was management's initial FY27 outlook.
CAH expects adjusted EPS of $12.40-$12.60, representing roughly 10-12% growth. It’s also noteworthy that the EPS guidance represents 13%-15% growth from an adjusted FY26 earnings baseline of $10.95 per share that excludes the one-time tariff-refund benefit.
More importantly, that outlook was well above Wall Street’s consensus FY27 EPS forecast of $12.18 (Current Qtr below).
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The guidance also exceeds management's longer-term EPS growth framework, providing another indication that recent operational momentum isn't simply the result of temporary benefits.
Growth is expected across several parts of the business. Pharmaceutical and Specialty Solutions revenue is projected to increase 3%-5% in FY27, accompanied by 8%-11% segment profit growth. Global Medical Products and Distribution sales are forecasted to rise 2%-4%, while its collection of other businesses is expected to produce revenue growth of 11%-13%.
The latter includes businesses such as At-Home Solutions and OptiFreight Logistics, while recent acquisitions are expanding Cardinal Health's exposure to higher-growth areas of healthcare. The recently acquired Strive Medical business and announced acquisition of AdaptHealth's Diabetes Health operations are expected to produce meaningful contributions to growth.
A Massive New Buyback Adds to the Bull Case
More intriguing is that Cardinal Health's improving earnings outlook is being accompanied by aggressive capital returns.
The board authorized an additional $5 billion for share repurchases, bringing CAH's total remaining repurchase authorization to approximately $6.4 billion. Management expects to repurchase at least $1 billion of stock during FY27 after buying back roughly $1.35 billion during FY26.
That is particularly noteworthy given Cardinal Health's rising profitability. Repurchasing shares reduces the outstanding share count and can provide an additional boost to per-share earnings, complementing the underlying growth of a business.
Expanding share repurchase authorizations also demonstrates management's confidence in cash generation while leaving room for strategic investments and tuck-in acquisitions. Rather than relying on a single lever to create shareholder value, Cardinal Health is balancing organic investment, M&A, dividends, and share repurchases.
This comes as Cardinal Health has increased its dividend for 29 consecutive years, with an annual yield approaching 1%, and its 20% payout ratio suggests there is plenty of room for future dividend hikes.
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Bottom Line: CAH Still Looks Like a Buy
Cardinal Health's Q4 report wasn't perfect. Revenue missed expectations, and part of the quarterly earnings upside stemmed from a one-time tariff refund. Those factors deserve consideration, particularly with CAH trading near record territory.
However, the broader picture looks considerably more attractive.
Adjusted earnings still exceeded Q4 EPS expectations after removing the tariff benefit; management's $12.40-$12.60 FY27 EPS outlook calls for 13%-15% underlying growth and came in well above consensus forecast, and several of Cardinal Health's businesses are positioned for further expansion. Add a $6.4 billion total share-repurchase authorization and at least $1 billion of planned FY27 buybacks, and there are multiple potential drivers of EPS growth.
Trading at what is still a reasonable 19X forward earnings multiple, CAH currently sports a Zacks Rank #2 (Buy), along with an overall “A” VGM Zacks Style Scores grade for the combination of Value, Growth, and Momentum.
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