Thursday, Mizuho updated its outlook on Cardinal Health (NYSE:CAH), increasing the price target to $110 from the previous $104 while maintaining a Neutral rating on the shares. The adjustment comes in the wake of the company's fiscal fourth-quarter earnings for 2024.
The firm's decision to raise the price target reflects a more optimistic earnings estimate for the fiscal years 2025 and 2026. This reassessment is based on the company's recent performance, which showed resilience despite losing the Optum contract. The improved guidance in segment profit within the Pharma division has been a key factor in this revision.
In addition to the Pharma segment's success, Cardinal Health's General Medical Products Distribution (GMPD) is also experiencing a continued recovery, contributing to the firm's decision to adjust its price target. The positive adjustments in earnings estimates and price target align with the company's recent performance trends.
Despite the positive adjustment in the price target, the firm has reiterated its Neutral rating on Cardinal Health's stock. The decision to maintain this rating is attributed to the current valuation of the company's shares. The analyst's comment clarifies the rationale behind the decision: "We are reiterating our Neutral rating due to valuation."
Cardinal Health's recent financial results and Mizuho's subsequent price target adjustment highlight the company's resilience and recovery in key business segments. The new price target of $110 reflects the firm's updated expectations for the company's financial performance in the coming fiscal years.
In other recent news, Cardinal Health reported a 29% increase in earnings per share (EPS) for its fourth quarter and fiscal year 2024, alongside a 12% rise in fourth-quarter revenue to $59.9 billion. The fiscal year 2024 revenue also climbed by 11% to $227 billion, with the pharmaceutical and specialty solutions segment significantly contributing to this growth. The company ended the fiscal year with a cash balance of $5.1 billion and generated nearly $4 billion in adjusted free cash flow.
Cardinal Health revised its fiscal year 2025 guidance upwards, projecting an EPS between $7.55 and $7.70. The company plans to generate at least $500 million in cash over the next two years and has increased its share repurchase expectation to $750 million for FY2025. Despite the expected decline in Pharma segment revenue due to a significant customer contract expiration, other segments are anticipated to see a revenue growth of 10% to 12%.
The company's strategic investments and partnerships, such as the Averon joint venture with CVS Health (NYSE:CVS), are expected to drive future growth. However, the company also acknowledged challenges such as the impact of insulin pricing changes and slow biosimilar market penetration.
Cardinal Health is investing in AI and machine learning to improve efficiency and cost savings and is focused on increasing access to affordable therapy.
InvestingPro Insights
As Mizuho updates its outlook on Cardinal Health, it's noteworthy to consider additional metrics and insights from InvestingPro. Cardinal Health's management has demonstrated a commitment to shareholder value through aggressive share buybacks, and the company has an impressive track record of raising its dividend for 36 consecutive years, signaling financial stability and investor confidence. These actions are reflective of a management team that is actively engaged in enhancing shareholder value.
InvestingPro data shows that Cardinal Health boasts a market capitalization of $25.92 billion, underscoring its substantial presence in the healthcare industry. The company's price-to-earnings (P/E) ratio stands at 30.53, which is high, indicating that investors may expect higher earnings growth in the future. This is in line with the company's net income, which is expected to grow this year. Moreover, the stock has experienced a significant return over the last week, with a 7.52% increase in price total return. This short-term performance could be indicative of positive market sentiment following the recent earnings report and the upward revision of the price target by Mizuho.
For investors seeking more in-depth analysis and additional InvestingPro Tips, there are 19 more tips available on Cardinal Health, providing a comprehensive view of the company's financial health and market position. These insights can be found at https://www.investing.com/pro/CAH, offering valuable perspectives for those considering an investment in the company.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.