We’ve taken a closer look at Cardinal Health’s quarterly results and conference call following Thursday’s sell-off. Our conclusion: The 4.9% decline was an overreaction, and we would be buyers on Friday morning if not restricted. Note: We’re prevented from trading stocks that Jim Cramer mentions on CNBC TV for 72 hours. He mentioned Cardinal on Thursday, which is why we can’t follow through with a purchase Friday. Of course, that doesn’t prevent us from telling members what we would otherwise do. When we took a stake in early March , a big part of our thesis was Cardinal’s track record of delivering double-digit earnings-per-share growth and its exposure to the secular tailwind of an aging U.S. population. Plus, Cardinal has expanded into faster-growing, higher-margin areas like specialty pharmaceutical distribution, at-home delivery, and non-distribution businesses, such as owning the back-office of medical practices, known as management services organizations (MSOs). Don’t get us wrong: Thursday’s fiscal 2026 third-quarter report was not perfect, even beyond a top-line miss. In particular, Jim Cramer wishes management had better telegraphed its plans to book a $184 million goodwill impairment charge for its Navista and ION reporting unit, which is part of the MSO business. This created some noise around the release, but on the earnings call, CEO Jason Hollar said this isn’t changing their strategy on that business line. Also on the positive side, Hollar said Cardinal remains confident that it will be able to grow adjusted earnings in its fiscal 2027 within its long-term target range of 12% to 14%. This helps us feel confident that we can trust the earnings estimates for Cardinal. And based on those estimates, Cardinal shares are getting cheaper, trading at roughly 16.5 times the next 12 months’ estimates, according to FactSet. That’s down from about 20 times earnings in early March when we took our stake. We’re not alone in thinking the market overreacted to Thursday’s release. A number of Wall Street analysts made a similar case. Jefferies said the Cardinal thesis “unchanged,” while acknowledging investors had high expectations into Thursday. “We are defending CAH shares as we see no good reason the stock should be off on [Thursday’s] print absent some massive rotation move that we see as unwarranted,” analysts at Leerink Partners wrote to clients, adding that “momentum remains robust.” That’s why the pullback in Cardinal shares on Thursday — on top of their declines in recent weeks — is worth buying. Healthcare stocks are out of favor in this market, and we like to be opportunistic. Cardinal is a good house in a bad neighborhood. When the neighborhood starts to come back into favor, the good houses tend to be bought first. (Jim Cramer’s Charitable Trust is long CAH. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
