Cardinal Health: Is This Dividend Aristocrat a Buy or Sell? Shocking Earnings Results Revealed!

Columbus, Ohio – Cardinal Health Inc., a prominent player in the healthcare sector, has garnered attention from dividend growth investors for its impressive track record. With nearly 40 consecutive years of increasing dividends, the company has demonstrated resilience and steady growth in a sector known for its recession-proof nature.

The company’s recent third-quarter earnings report showcased positive results, with revenue reaching almost $55 billion and adjusted earnings-per-share exceeding expectations. Despite a slight revenue shortfall compared to analyst forecasts, Cardinal Health’s performance in its Pharmaceutical and Specialty Solutions segment stood out, with a 9% growth in sales and a 4% increase in profit.

Looking ahead, Cardinal Health provided an optimistic outlook for the fiscal year, expecting double-digit revenue growth and an increase in adjusted earnings-per-share. Additionally, the company’s preliminary guidance for fiscal year 2025 suggests continued growth potential.

While Cardinal Health has built a strong reputation as a Dividend Aristocrat with consistent dividend increases over the years, concerns linger about the stagnant dividend growth in recent times. The company’s dividend payout ratio remains favorable, indicating a secure dividend payout supported by earnings.

Despite its strengths, Cardinal Health faces risks in its narrow profit margins and potential contract cancellations, such as the impending loss of a contract with OptumRx. These factors could pose challenges to sustained growth and profitability for the company.

From a valuation standpoint, Cardinal Health’s current trading price reflects a forward price-to-earnings ratio of 13.1, presenting a discount to the health care sector as a whole but a premium to its historical average. Analysts suggest a cautious approach to valuation, with considerations for both positive and negative developments shaping the stock’s performance.

In conclusion, while Cardinal Health boasts leadership in the drug distribution industry and a strong dividend growth history, investors must weigh the risks associated with limited margin growth, slowing dividend increases, and potentially inflated valuation. With a valuation indicating possible overpricing, some experts recommend waiting for a more attractive entry point, leading to a cautious “sell” rating for the stock at present levels.