Jim Cramer Notes Cardinal Health (CAH) is “Too Attractive to Ignore”

On the September 2 episode of Mad Money, Jim Cramer called Cardinal Health, Inc. (NYSE:CAH) one of his "absolute favorites" and mentioned its growing exposure to specialty pharmaceuticals and higher-margin healthcare services.

Cardinal's been running circles around McKesson and Cencora. They consistently put up the best numbers because this company has gradually become less of a commoditized service provider and more of a specialized player.

Cardinal Health Earnings and Fiscal 2027 Guidance

Cardinal Health, Inc.'s (NYSE: CAH ) fiscal fourth-quarter revenue rose 6% to $63.7 billion but missed estimates, while adjusted earnings per share came in at $2.91. Excluding a $0.31 per share tariff refund benefit, adjusted EPS was $2.60. Management forecast fiscal 2027 non-GAAP EPS of $12.40 to $12.60, a 13% to 15% growth, while adjusted free cash flow is expected at $3.5 billion to $4 billion.

The revenue miss is less significant if the company continues converting pharmaceutical volume into earnings. Lower branded-drug prices, including those affected by Medicare negotiations, can reduce reported sales without a proportional decline in distributor fees. The shift toward generics can have a similar effect because lower-priced drugs generate less revenue but can support attractive margins and high volumes. As Cramer said:

Remember, volume is where Cardinal really makes the money, volume, okay? That's why I keep shrugging off the revenue misses.

The company is also moving beyond traditional distribution. Its Other segment, which includes Nuclear and Precision Health Solutions, OptiFreight Logistics and at-Home Solutions, is expected to produce 11% to 13% revenue growth and 15% to 18% profit growth in fiscal 2027. Cardinal agreed in July to acquire AdaptHealth's diabetes health business and Strive Medical for approximately $360 million, expanding its at-home medical-supply operations.

Cardinal Health Faces Drug Pricing and Valuation Risks

The main risk is execution. Cardinal Health, Inc. (NYSE:CAH) is forecasting 13% to 15% adjusted EPS growth for fiscal 2027, but the stock has already rerated close to its record high. If specialty growth slows, drug-pricing changes put greater pressure on distributor fees, or margins fall short of expectations, the shares could face a sharper valuation reset than they would have at their earlier, lower multiple. Customer concentration adds another vulnerability. CVS Health accounted for 28% of Cardinal's fiscal 2026 revenue, while its five largest customers represented 43%, leaving earnings exposed to major contract losses or pricing concessions.