Bull of the Day: Cardinal Health (CAH)

Cardinal Health, a Zacks Rank #1 (Strong Buy), operates as a healthcare services and products company in the United States and internationally. The company is essentially a middleman in the medical supply chain, as it purchases and delivers medications and devices to healthcare facilities such as hospitals and pharmacies.

The stock recently broke out to a 52-week high on increasing volume. Shares continue to display relative strength as buying pressure accumulates in this market leader.

Cardinal Health is part of the Zacks Medical – Dental Supplies industry group, which currently ranks in the top 32% out of approximately 250 Zacks Ranked Industries. Because it is ranked in the top half of all Zacks Ranked Industries, we expect this group to outperform the market over the next 3 to 6 months.

Stocks in this industry are relatively undervalued based on traditional valuation metrics. A leading component of this group, Cardinal Health is also projected to experience above-average earnings growth, which signifies a powerful combination that should lead to higher prices in the future.

Historical research studies suggest that approximately half of a stock’s price appreciation is due to its industry grouping. In fact, the top 50% of Zacks Ranked Industries outperforms the bottom 50% by a factor of more than 2 to 1.

It’s no secret that investing in stocks that are part of leading industry groups can give us a leg up relative to the market. By focusing on leading stocks within the top 50% of Zacks Ranked Industries, we can dramatically improve our stock-picking success.

Company Description

Cardinal Health is one of the world’s largest healthcare services and products providers. The company serves nearly 90% of U.S. hospitals, delivers more than 43,000 pharmaceutical shipments daily, and manages a broad portfolio of medical, surgical, and laboratory products.

In addition, the drug wholesaler offers customized solutions for pharmacies, ambulatory surgery centers, clinical laboratories, and physician offices. It dispenses branded and generic pharmaceutical, specialty pharmaceutical, and over-the-counter healthcare and consumer products. Cardinal Health also delivers specialty drug distribution services in areas such as oncology, gastroenterology, and rheumatology. 

Earnings Trends and Future Estimates

Cardinal Health CAH has shown a consistent ability to deliver positive earnings surprises; the leading healthcare company surpassed the earnings mark in each of the past 14 quarters. The nationwide drug distributor delivered a trailing four-quarter average surprise of over 9%, reflecting strong execution.

This track record aligns perfectly with the power of the Zacks Rank system, which prioritizes stocks showing upward earnings revisions.

Earlier this month, Cardinal Health posted a double-beat report relative to our consensus expectations, with sales soaring 18.8% from the year-ago period to $65.6 billion, alongside a sizable 36.3% year-over-year growth rate in adjusted EPS ($2.63). It also raised its full-year outlook following the strong quarter, signaling confidence in its underlying businesses. Cardinal Health expects its specialty products to generate more than $50 billion in sales during the current fiscal year.

The Ohio-based company has been the beneficiary of improving earnings estimate revisions as of late. Looking into fiscal 2026, analysts have raised their EPS estimates by 4.35% in the past 60 days. The Zacks Consensus Estimate now stands at $10.31 per share, reflecting over 25% growth relative to the prior year.

Let’s Get Technical

Cardinal Health’s stock performance is reflective of the fundamental story as shares have surged to a series of 52-week highs. Only stocks that are in extremely powerful uptrends are able to make this type of price move and widely outperform the market. This is the kind of stock we want to include in our portfolio – one that is trending well and receiving positive earnings estimate revisions.

Notice how shares remain above upward-sloping 50-day (blue line) and 200-day (red line) moving averages. The stock has advanced nearly 80% over the past year, and momentum appears to be continuing this year. With both strong fundamentals and technicals, CAH stock is poised to continue its outperformance.

Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. As we know, Cardinal Health has recently witnessed positive revisions. As long as this trend remains intact (and CAH continues to deliver earnings beats), the stock will likely continue its bullish run throughout this year.

Bottom Line

Backed by a leading industry group and robust history of earnings beats, it’s not difficult to see why this company is a compelling investment. Currently, CAH stock carries a Zacks Rank #1 (Strong Buy), driven by favorable estimate momentum.

Solid institutional buying should continue to provide a tailwind for the stock price. Robust fundamentals combined with a strong technical trend certainly justify adding shares to the mix. If you haven’t already done so, be sure to put Cardinal Health on your shortlist.

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This article originally published on Zacks Investment Research (zacks.com).

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