Cardinal Health Upside 'Elusive' Says Analyst Following Elliott Management Reports

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Cardinal Health Upside 'Elusive' Says Analyst Following Elliott Management Reports
Credit: © Reuters.

By Sam Boughedda

On Monday, the Wall Street Journal reported that Elliott took a stake in Cardinal Health (NYSE: CAH ) and nominated five directors to the company's board.

The report stated Elliot Management has a "large" position in the company and is aiming for a few seats on Cardinal's board following, making the nominations two weeks ago, before Cardinal replaced its CEO.

Here's what analysts said about the news:

A Morgan Stanley analyst said the news, if confirmed, may explain the board's move to action announced on Cardinal's earnings, which included a change in CEO, the unveiling of detailed profit targets for FY25, and an emphasis on growing the higher margin private label.

He added that despite recent outperformance in Cardinal's shares, the stock has "meaningfully lagged" peers and the market over the past five years. "While a turnaround in Cardinal's Medical segment (~10% of company profit in FY22) remains a "show me" story, Elliott's potential involvement could lead to increased confidence that the company and board will evaluate the best path forward," said the analyst, who maintained an Overweight rating and $70 price target on Cardinal.

Meanwhile, a Deutsche Bank analyst raised the firm's price target on the stock to $69 to $72, keeping a Hold rating.

"The news comes less than a week after Cardinal reported F4Q results where it announced the departure of its CEO and the ascension of CFO Jason Hollar to chief executive. Investors and analysts have been discussing the potential for activist involvement in CAH for more than a year, given the stock's chronic underperformance vs peers  ABC and MCK . But with stock moving ~35% in a month, and a turnaround plan in place (and largely priced in), we see upside as elusive in CAH shares," said the analyst.

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