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Cardinal Health Inc CAH

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Stock XNYS Rating as of
$103.81 +0.27 (0.26%)
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As of Delayed Price Post-Trading: $103.49 −0.32
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Company Report

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Cardinal Health: Unexpected Loss of OptumRx’s Contract Raises Concerns for Near-Term Future

Keonhee Kim

Narrow-moat Cardinal Health reported this morning that its contract with UnitedHealth Group’s Optum Rx will not be renewed. Cardinal signed a multiyear contract with Optum in June 2015 to supply generic and branded pharmaceuticals to Optum’s mail and specialty pharmacies. It was set to expire in June 2024. Over the past three fiscal years, Optum served as a key customer for Cardinal, making up 15%, 16%, and 16% of its total sales, respectively. According to the Drug Channels Institute, Optum Specialty Pharmacy made up roughly 13% of overall prescription revenue from specialty drugs in the US in 2023. On the news, the stock dropped approximately 5%.

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Price vs Fair Value

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CAH is trading at a 17% premium.
Price
$103.37
Fair Value
$97.00
Uncertainty
Medium
1-Star Price
$423.90
5-Star Price
$37.50
Economic Moat
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Capital Allocation
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Bulls Say, Bears Say

Bulls

Cardinal Health distributes pharmaceutical products to nearly one third of the industry, leading to substantial negotiation leverage with generic drug manufacturers.

Bears

Reimbursement pressures on pharmacy and provider customers has led to an emphasis on cost containment, pressuring Cardinal Health’s profitability.

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Trading Information

Previous Close Price
$103.54
Day Range
$103.58–104.87
52-Week Range
$77.56–116.04
Bid/Ask
$99.88 / $106.32
Market Cap
$25.25 Bil
Volume/Avg
1.6 Mil / 2.3 Mil

Key Statistics

Price/Earnings (Normalized)
15.03
Price/Sales
0.12
Dividend Yield (Trailing)
1.93%
Dividend Yield (Forward)
1.93%
Total Yield
7.90%

Company Profile

Cardinal Health is one of three leading pharmaceutical wholesalers in the US, engaged in sourcing and distributing of branded, generic, and specialty pharmaceutical products to pharmacies (retail chains, independent, and mail order), hospitals networks, and healthcare providers. Along with Cencora and McKesson, the three comprise well over 90% of the US pharmaceutical wholesale industry. Cardinal Health also supplies medical-surgical products and equipment to healthcare facilities in North America, Europe, and Asia.
Sector
Healthcare
Industry
Medical Distribution
Stock Style Box
Mid Core
Total Number of Employees
48,000
Website
https://www.cardinalhealth.com

Competitors

Valuation

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Metric
CAH
MCK
COR
Price/Earnings (Normalized)
 15.0318.2518.95
Price/Book Value
 ——52.06
Price/Sales
 0.120.230.18
Price/Cash Flow
 10.7114.9414.86
Price/Earnings
CAH
MCK
COR

Financial Strength

Metric
CAH
MCK
COR
Quick Ratio
 0.430.480.48
Current Ratio
 0.980.920.88
Interest Coverage
 18.3714.729.41
Quick Ratio
CAH
MCK
COR

Profitability

Metric
CAH
MCK
COR
Return on Assets (Normalized)
 3.89%6.00%4.19%
Return on Equity (Normalized)
 ——574.41%
Return on Invested Capital (Normalized)
 89.85%66.76%48.08%
Return on Assets
CAH
MCK
COR
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Medical Distribution Industry Comparables

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Name
Morningstar Rating for Stocks
Capital Allocation
Economic Moat
Market Cap
MCK
McKesson CorpMhgcmjxkDnmjtw$69.9 Bil
COR
Cencora IncYkkqllsKhrpvz$47.4 Bil
SHTDY
Sinopharm Group Co Ltd ADR—Hqshkm$8.6 Bil
SHTDF
Sinopharm Group Co Ltd—Tlflqy$8.6 Bil
SHPMY
Shanghai Pharmaceuticals Holding Co Ltd ADR repr Class H—Mknvf$8.2 Bil
SHPMF
Shanghai Pharmaceuticals Holding Co Ltd Class H—Yyyyhs$8.1 Bil
AMFPF
Amplifon SpA Az nom Post Frazionamento—Hqbps$7.6 Bil
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Medipal Holdings Corp ADR—Cftj$3.3 Bil
MEPDF
Medipal Holdings Corp—Ztwp$3.3 Bil

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