We've taken a closer look at Cardinal Health's quarterly results and Thursday's post-settlement conference call. Our conclusion: The 4.9% drop was an overreaction and if we were not restricted, we would be buyers on Friday morning. Note: We cannot trade stocks that Jim Cramer mentions on CNBC TV for 72 hours. He mentioned Cardinal on Thursday, so we can't make a purchase on Friday. Of course, that doesn't stop us from telling members what we would do differently. When we took a stake in early March, a big part of our thesis was Cardinal's track record of generating double-digit earnings per share growth and its exposure to the secular tailwind of an aging U.S. population. Additionally, Cardinal has expanded into higher-margin, faster-growing areas such as specialty pharmaceutical distribution, home delivery, and non-distribution businesses such as back-office ownership of medical practices, known as management services organizations (MSOs). Don't get us wrong: Thursday's fiscal 2026 third-quarter report wasn't perfect, even beyond a revenue miss. In particular, Jim Cramer wishes management had better telegraphed its plans to record a $184 million goodwill impairment charge for its Navita and ION reporting unit, which is part of the MSO business. This created some noise around the launch, but on the earnings call, CEO Jason Hollar said this won't change its strategy in that line of business. Also on the positive side, Hollar said Cardinal remains confident 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 Cardinal's earnings estimates. And based on those estimates, Cardinal shares are getting cheaper, trading at about 16.5 times trailing-12-month estimates, according to FactSet. That's down from about 20 times earnings in early March, when we acquired our stake. We're not the only ones who think the market overreacted to Thursday's release. Several Wall Street analysts made similar arguments. Jefferies said Cardinal's thesis “hasn't changed,” although he acknowledged investors had high expectations heading into Thursday. “We are defending CAH shares because we see no good reason why the shares should be listed [Thursday’s] “Print without some massive churn movement that we consider unjustified,” analysts at Leerink Partners wrote to their clients, adding that “momentum remains strong.” That's why Cardinal stock's pullback on Thursday, in addition to its declines in recent weeks, is worth buying. Cramer's Charitable Trust is long CAH. See here for a full list of actions). As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim places a trade. Jim waits 45 minutes after sending a trade alert before executing the trade. INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY, TOGETHER WITH OUR DISCLAIMER. NO FIDUCIARY OBLIGATION EXISTS OR IS CREATED BY VIRTUE OF THE RECEIPT OF ANY INFORMATION PROVIDED IN RELATION TO THE INVESTING CLUB.
