Here's Why You Should Add Cardinal Health Stock to Your Portfolio Now

Cardinal Health CAH is well-positioned for continued growth, thanks to the expansion of its speciality portfolio. The firm delivered strong fiscal second-quarter results, fueled by robust demand in pharmaceutical distribution and accelerating specialty services. Growth in theranostics, at-home solutions and logistics businesses, alongside improving medical segment performance, continues to strengthen CAH’s long-term earnings outlook.

This Zacks Rank #2 (Buy) company’s shares have gained 49.2% in the past six months compared with the industry’s 23.3% growth. The S&P 500 has jumped 6.4% during the same time frame.

The leading provider of healthcare services and products has a market capitalization of $53.26 billion. It projects 15% growth over the next five years and expects to witness continued improvement in its business going forward. Cardinal Health’s earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, delivering an average surprise of 9.3%.

Let’s delve deeper.

Upsides

Strong Momentum in Pharmaceutical and Specialty Solutions: Cardinal Health delivered robust growth in its core Pharmaceutical and Specialty Solutions segment, with revenue rising 19% to $61 billion and segment profit increasing 29% in the second quarter of fiscal 2026. Growth was supported by strong demand across brand, specialty and generics, along with contributions from specialty distribution, MSO platforms and biopharma services. Management highlighted that specialty revenues are expected to exceed $50 billion in fiscal 2026, underscoring the company’s successful pivot toward higher-margin specialty therapies, such as oncology and urology. This expansion strengthens Cardinal Health’s competitive positioning in the fast-growing specialty pharmaceutical ecosystem.

High-Growth Adjacent Businesses Drive Profit Diversification: Cardinal Health’s “Other” growth businesses — Nuclear and Precision Health Solutions, at-Home Solutions and OptiFreight Logistics — delivered 34% revenue growth and 52% profit growth in the fiscal second quarter. Demand was fueled by structural healthcare trends, including theranostics adoption, home-based care expansion and supply chain optimization. Theranostics alone generated more than 30% revenue growth, supported by a pipeline of more than 70 products. These segments provide faster growth and higher margins compared with traditional distribution, allowing Cardinal Health to diversify earnings streams and reduce reliance on its low-margin core pharmaceutical distribution business.

Improving Profitability in the GMPD Segment Turnaround: Cardinal Health’s Global Medical Products and Distribution (GMPD) segment showed tangible progress in its turnaround strategy, with segment profit rising from $18 million to $37 million year over year. The improvement reflects operational restructuring, cost optimization and stronger demand for Cardinal Health branded products, which grew 10% in the United States. Management also emphasized improved service levels and supply chain efficiency following manufacturing and logistics investments. If these operational gains persist, the GMPD business could transition from a long-standing drag on earnings to a modest contributor to profitability and margin expansion.

Downsides

Profit Growth Moderation Expected in the Second Half: Despite strong first-half results in fiscal 2026, Cardinal Health expects profit growth in the Pharma segment to moderate to mid-teens levels in the second half. The slowdown reflects difficult comparisons from onboarding $10 billion in new customers last year and the anniversary of prior acquisitions. While demand remains healthy, the normalization of these one-time growth drivers could temper earnings momentum. Investors may view this deceleration as a signal that recent growth levels were partly driven by temporary tailwinds rather than purely sustainable organic expansion.

Tariffs and Supply Chain Costs Weigh on Medical Segment: The GMPD segment continues to face external cost pressures, particularly from tariffs affecting medical product sourcing. Although cost optimization initiatives helped offset some of the impact, tariffs still represented a net headwind to segment profitability during the quarter. Given the global nature of medical product manufacturing and sourcing, persistent geopolitical trade policies or supply chain disruptions could increase procurement costs, compress margins and limit the pace of profitability recovery within the GMPD turnaround plan.

Limited Margin Expansion in Core Distribution Model: Cardinal Health’s pharmaceutical distribution business, while large and stable, structurally operates with thin margins and high volume dependence. Management acknowledged that major drug categories such as GLP-1 therapies contribute meaningfully to revenue growth but have a limited impact on underlying profitability. This reflects the inherent economics of pharmaceutical distribution, where scale drives revenue but margins remain compressed. As a result, sustained earnings expansion increasingly depends on specialty services and adjacent businesses rather than the core distribution segment alone.

Estimate Trend

Cardinal Health has been witnessing an improving estimate revision trend for 2026. Over the past 30 days, the Zacks Consensus Estimate for earnings per share (EPS) has improved 2.7% to $10.31.

The Zacks Consensus Estimate for the fiscal 2026 third-quarter revenues is pegged at $62.42 billion, indicating a 13.7% improvement from the year-ago reported number. The Zacks Consensus Estimate for EPS is pinned at $2.80, implying a year-over-year gain of 19.2%.

Cardinal Health, Inc. Price

Cardinal Health, Inc. price | Cardinal Health, Inc. Quote

Other Stocks to Consider

Some other top-ranked stocks from the same medical industry are Globus Medical GMED, Pacific Biosciences of California PACB and Edwards Lifesciences EW.

Globus Medical, sporting a Zacks Rank #1 (Strong Buy) at present, reported fourth-quarter 2025 adjusted EPS of $1.28, beating the Zacks Consensus Estimate by 20.8%. Revenues of $826 million surpassed the Zacks Consensus Estimate by 4.9%. You can see the complete list of today’s Zacks #1 Rank stocks here.

GMED has an estimated long-term earnings growth rate of 9.6% compared with the industry’s 14% rise. The company beat earnings estimates in each of the trailing four quarters, with the average surprise being 13.2%.

Pacific Biosciences of California, currently flaunting a Zacks Rank of 1, reported a fourth-quarter 2025 adjusted loss per share of 12 cents, which surpassed the Zacks Consensus Estimate by 36.8%. Revenues of $45 million beat the Zacks Consensus Estimate by 9.4%.

PACB has an estimated earnings decline rate of 1.9% against the industry’s 11.4% improvement. The company beat earnings estimates in each of the trailing four quarters, with the average surprise being 27.7%.

Edwards Lifesciences, currently carrying a Zacks Rank #2 (Buy), reported a second-quarter fiscal 2026 adjusted EPS of 58 cents, which missed the Zacks Consensus Estimate by 6.5%. Revenues of $1.57 billion beat the Zacks Consensus Estimate by 2%.

EW has an estimated long-term earnings growth rate of 12.9% compared with the industry’s 14% rise. The company beat earnings estimates in three of the trailing four quarters and missed once, with the average surprise being 5.5%.

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

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