Cardinal Health CAH recently announced that it has entered into definitive agreements to acquire two companies. These agreements are likely to accelerate Cardinal Health's strategic growth areas along with enhancing patient care.

CAH is likely to acquire a majority stake in GI Alliance (“GIA”), along with acquiring the Advanced Diabetes Supply Group (“ADSG”). GIA is the country's leading gastroenterology management services organization (“MSO”), from a combination of GIA physician owners and funds managed by affiliates of Apollo. ADSG is one of the country's leading diabetic medical supplies providers.

Likely Trend of CAH Stock Following the News

Following the announcement, shares of the company moved nearly 1.5% north to $123.51 at yesterday’s closing. In the year-to-date period, CAH’s shares have gained 22.5% compared with the industry’s 5.8% growth. The S&P 500 has increased 26.3% in the same time frame.

Meanwhile, CAH currently has a market capitalization of $29.44 billion. It has an earnings yield of 6.36%, higher than the industry’s yield of 5.28%. In the last reported quarter, CAH delivered an earnings surprise of 14.63%.

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More on CAH’s Strategic Acquisitions

Owing to the acquisition, CAH is likely to strengthen its multi-specialty business as GIA is likely to operate as a platform within its Pharmaceutical and Specialty Solutions segment. GI Alliance's leading national MSO platform includes more than 900 physicians across 345 practice locations in 20 states, with extensive reach into the local communities it serve. GIA supports a complete continuum of gastroenterology care across its member sites, with significant additional depth in anesthesiology, pathology, infusion, radiology and clinical research.

GI Alliance operates a multi-specialty platform that will further expand both nationally and in other key therapeutic areas. This will also build upon the technology and specialty practice capabilities acquired by Cardinal Health in the previously announced acquisitions of Specialty Networks (urology, GI, rheumatology) and Integrated Oncology Network (medical oncology, radiation oncology, urology).

Meanwhile, the acquisition of ADSG is likely to boost CAH’s at-Home Solutions business. In line with Cardinal Health's at-Home Solutions strategy to support the rapidly growing diabetic patients, ADSG provides comprehensive diabetes solutions that are customized to support individual patients at home. ADSG serves approximately 500,000 patients annually by providing the latest innovations in diabetes therapies from leading manufacturers.

CAH’s Capital Deployment Plans & Transactional Details

Cardinal Health is likely to purchase its majority stake in GIA for approximately $2.8 billion in cash, which will represent 71% ownership. Meanwhile, ADSG is set to be acquired by CAH for approximately $1.1 billion in cash. The company expects both acquisitions to close in early calendar year 2025, subject to customary closing conditions, including the receipt of required regulatory approvals. CAH also entered into an agreement with Bank of America for the letter of commitment to provide an unsecured bridge term loan facility to fund the acquisitions.

The two transactions are expected to grow Cardinal Health's revenues, segment profit and adjusted earnings per share in the first 12 months following the closure. The company expects to reflect the transactions in its fiscal year 2025 guidance upon closing. 

More on CAH’s Other Recent Acquisitions

In September, CAH announced an agreement to acquire Integrated Oncology Network (“ION”) for $1.115 billion in cash. This planned acquisition underscored Cardinal Health’s strategic focus on expanding its presence in specialty care, particularly oncology.

By integrating ION into its portfolio, Cardinal Health strengthens its support for independent community oncology practices, empowering the company to remain autonomous while accessing advanced services and technology. This deal not only enhances Cardinal Health’s oncology service offerings but also accelerates its mission to drive value-based, patient-centered care and ancillary services.

In January, CAH announced its acquisition of Specialty Networks, a technology-enabled multi-specialty group purchasing and practice enhancement organization, for $1.2 billion in cash. This acquisition was indicative of Cardinal Health's strategic focus on investing to boost the company's Specialty business and supply cutting-edge personnel, capabilities and technology that meet important demands for both its customers and the business.

CAH’s Zacks Rank & Other Stocks to Consider

CAH presently carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks in the broader medical space are AngioDynamics ANGO, Quest Diagnostics DGX and RadNet RDNT. Each stock presently carries a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

ANGO’s earnings surpassed estimates in three of the trailing four quarters and missed once, delivering an average surprise of 31.71%.

AngioDynamics’ shares have lost 19.2% year to date against the industry’s6.1% growth.

Quest Diagnostics has an estimated long-term growth rate of 6.8%. DGX's earnings surpassed estimates in each of the trailing four quarters, with an average surprise being 3.3%.

Quest Diagnostics has gained 42% year to date compared with the industry's 14.9% growth.

RadNet’s earnings surpassed estimates in the trailing four quarters, the average surprise being 98.2%.

RDNT shares have risen 93.7% year to date compared with the industry’s 14.8% growth.

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