Shares of Cardinal Health Inc. (NYSE: CAH) hit a new all-year high of $71.45 yesterday after activist hedge fund Elliott Management disclosed a large stake in the health care services company. Shares ended the day almost flat at $69.97 on August 15.
Paul Singer-led Elliott nominated five candidates for the Cardinal’s Board about two weeks back. The last date for nominating directors ended on August 7. Although Elliott’s intention to invest in Cardinal is unknown, the activist hedge fund has also increased stakes in Aerojet Rocketdyne (AJRD), Pinterest (PINS), PayPal Holdings (PYPL), and Endeavor Group Holdings (EDR).
Cardinal Health is one of the largest American medical products distributors. CAH Stock has gained nearly 37% so far this year.
Cardinal’s CEO Steps Down After Posting Mixed Q4 Results
Last week, Cardinal announced the abrupt departure of its CEO, Mike Kaufmann. Effective September 1, Kaufmann will be replaced by Cardinal’s current CFO, Jason Hollar, who will also join the Board of Directors. Cardinal has been dodging the effects of inflation and supply chain constraints on its medical supplies business.
On August 11, Cardinal reported mixed fourth-quarter Fiscal 2022 results, beating revenue but missing earnings estimates. Revenue of $47.10 billion rose 10.6% year-over-year and came in $2.28 billion higher than the consensus. However, adjusted earnings of $1.05 per share rose 36% year-over-year but missed analyst estimates by $0.13 per share.
Cardinal’s fourth quarter revenue was boosted by a 13% year-over-year jump in its Pharmaceutical segment revenue of $43.3 billion. Branded pharmaceutical sales from existing and new customers added the much-needed pace to the segment’s revenue.
On the other hand, its Medical segment reported an 11% year-over-year decline in revenue to $3.8 billion. This slump was due to the divestiture of the Cordis business as well as lower products and distribution volumes.
Notably, the company announced a regular quarterly common stock dividend of $0.49 per share, representing a current dividend yield of 2.84%.
Is Cardinal Health Stock a Buy?
On TipRanks, CAH stock has a Hold consensus rating based on two Buys, six Holds, and one Sell. The average Cardinal Health stock forecast of $65.44 implies 6.5% downside potential to current levels.
On the other hand, TipRanks’ Stock Investors tool shows that investor sentiment is currently Positive on Cardinal Health, with 1.0% of portfolios tracked by TipRanks increasing their exposure to CAH stock over the past 30 days.
Elliott Management’s investment in Cardinal Health means that the activist investor surely sees some value potential in the stock. Elliott hasn’t clearly mentioned what strategic steps it expects Cardinal Health to undertake. Nonetheless, should its director nominations be accepted at the annual meeting, Elliott may put forth its motives through them.