Cardinal Health boosts price target amid specialty growth momentum

In early June 2025, Cardinal Health, Inc., a key player in the healthcare distribution sector based in the United States, garnered attention as BofA Securities analyst Allen Lutz reiterated a Buy rating for the company's stock. This followed the analyst's decision to raise Cardinal's price target from $165 to $170, citing significant momentum in specialty growth as well as a reduction in the company's previous scale disadvantage. Cardinal Health is poised to host its investor day in New York on June 12, where it is expected to present an updated outlook on its business performance versus prior assessments made two years ago. Lutz pointed out the favorable dynamics currently affecting the industry, including increased utilization rates and changes in out-of-pocket expenses driven by the Inflation Reduction Act. With strong operational performance over the past two years and rising expectations, the upcoming event is seen as crucial for Cardinal Health. Many stakeholders are eager for the company to reveal a roadmap aimed at ensuring sustained double-digit earnings per share growth and potential revisions to its pharmaceutical and specialty solutions EBIT growth outlook. During the investor day, management is anticipated to share insights regarding recent investments in specialized healthcare corridors, notably in Specialty Networks and the MSO platform, while addressing future growth trajectories and potential consolidation opportunities within the sector. Lutz has projected that Cardinal Health might revise its long-term pharmaceutical EBIT growth target, potentially increasing it from the existing range of 4-6% to between 5-7% or even 5-8%. This shift reflects not only internal operational improvements but also favorable market conditions. Historically, investors have perceived Cardinal Health as lagging behind major competitors like McKesson and Cencora in terms of pharmaceutical growth. However, Lutz suggested that these perceptions may now be outdated, as the company's prior scale disadvantages in specialty markets are diminishing. Importantly, due to Cardinal Health's relatively smaller size, recent mergers and acquisitions could produce a more pronounced growth impact compared to larger counterparts. Furthermore, updates are expected regarding the company's Global Medical Products and Distribution segment, including strategies to navigate tariff impacts, the ongoing development of its branded product portfolio, and its competitive stance in evolving demand trends. The Other segment has shown significant growth as well, leading to projections of sustained high-single-digit EBIT growth in that area. Overall, Lutz foresees that Cardinal Health will maintain a balanced approach to capital allocation, combining selective acquisitions, share repurchases, and an emphasis on reducing debt.