AI interpretation based on checked source excerpts. Issuer assertions and evidence limitations remain explicit.
Policy quality-scores-3: six equally weighted categories. The overall score requires full coverage. Missing inputs are not zero. Qualitative grades are sourced interpretations, not probabilities. 6/6 · 29/10/2026
Moat44
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
structural advantage · 2/4 · Shared sourcing and prime-vendor relationships are concrete operating infrastructure, and the generics program contributed to fiscal 2026 profit growth. Relative purchasing savings and customer switching burdens are unquantified. Competitor offerings overlap, leaving mixed evidence for structural differentiation rather than a demonstrated durable moat.
durability · 1/4 · Red Oak's term through June 2029 provides a defined period of contractual continuity, without establishing a lasting comparative advantage. Generic selling prices tend to decline after launch, and OptumRx's material departure demonstrates relationship fragility. The evidence supports weak protection, while leaving overall moat existence uncertain.
customer dependency · 2/4 · Prime-vendor purchasing and distribution support services suggest operational importance, while existing-customer sales growth indirectly demonstrates repeat demand. However, OptumRx accounted for 17 percent of fiscal 2024 consolidated revenue before its contracts expired. Cardinal's usefulness is evidenced; substantial customer dependence and switching costs are not.
erosion resilience · 2/4 · Fiscal 2026 GAAP operating earnings rose 15 percent, and IRA-related revenue pressure had not reduced profitability. These observed outcomes support resilience. Acquisition contributions, a one-time tariff refund, continuing tariff costs and the realized OptumRx impact prevent interpreting recovery as strong resistance to competitive or cost erosion.
Pricing power44
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
realized pricing · 1/4 · Cardinal disclosed raising prices on certain products in response to substantial tariff costs, establishing actual pricing action. Continuing tariff costs and earlier only partial inflation mitigation indicate fragile protection. The passages do not quantify net price realization or full cost recovery, so they support weak pricing evidence rather than the prior multi-year recovery claim.
retention · 2/4 · Fiscal 2026 sales growth from existing customers provides indirect evidence of repeat demand, supported by prime-vendor relationships. OptumRx's expiration and resulting operating and cash-flow effects materially offset this positive evidence. No retention rate, current named renewal or evidence of retention through price increases is supplied.
margin resilience · 2/4 · Annual GAAP operating earnings growth and the absence of an IRA profitability impact support earnings protection. Acquisition contributions and the $100 million one-time net operating profit impact from GMPD tariff refunds complicate attribution. Continuing tariff costs and the impairment demonstrate limits; earnings recovery does not independently prove organic pricing protection.
contractual freedom · 2/4 · Cardinal implemented price increases and changed commercial contracting processes to obtain greater pricing flexibility. Branded distribution compensation nevertheless typically references wholesale acquisition cost set by manufacturers. This supports mixed pricing discretion, with insufficient detail on repricing rights, negotiated service percentages, renewal constraints or the breadth of improved contractual flexibility.
Predictability93
5 consecutive published annual periods. Equal weights: nondeclining revenue frequency; revenue-growth volatility (5–40pp); positive FCF frequency; FCF-margin volatility (3–20pp). Stability indicator, not a growth forecast.
- Nondeclining revenue years (%)
- 75.00
- Revenue growth volatility (pp)
- 6.41
- Positive FCF years (%)
- 100.00
- FCF margin volatility (pp)
- 0.32
- observedAnnualPeriods
- 5.00
Financial strength56
Equal-weight grades: debt/FCF (1–8x), net debt/earnings before interest and tax (0–5x), interest service (1–12x), current ratio (0.75–2x). Earnings use reported operating income, an original issuer-reported unadjusted EBIT reconciled to net income, income tax and signed net interest, or reported pretax profit plus reported gross interest expense. Reported EBIT is distinct from GAAP operating income and gross interest. Interest service uses earnings/interest expense; if unavailable, it uses reported operating cash flow/cash interest paid, without relabeling cash paid as accrued expense. Nonpositive cash flow/earnings score 0 for their service component; reported zero interest with a positive numerator scores 100. Net cash scores 100 for net leverage. Missing disclosures remain unavailable. General nonfinancial-company rubric, not a credit rating; exceptional and nonoperating gains are not normalized out. IFRS finance-cost and cash-flow classifications retain their reported scope.
- debtFcfGrade
- 86.23
- netDebtEbitGrade
- 69.15
- interestCoverageGrade
- 59.17
- currentRatioGrade
- 10.61
- Debt / FCF (x)
- 1.96
- Net debt / operating income (x)
- 1.54
- Interest coverage (x)
- 7.51
- Current ratio (x)
- 0.88
Capital allocation82
Three-year equal-weight indicators: pretax operating return on average total assets (0–15%; alternative because at least one reported average invested-capital denominator is nonpositive; this is not ROIC), share-count growth (0–5%, lower better), share-based cost/revenue (2–20%, lower better), consolidated FCF/net income (0–1x). Return uses reported operating income, an original issuer-reported unadjusted EBIT reconciled to net income, income tax and signed net interest, or EBIT calculated from reported pretax profit plus reported gross interest expense; the issuer-reported EBIT is distinct from GAAP operating income and gross interest; exceptional/nonoperating gains are not normalized out. Share-based cost uses the reported cash-flow add-back or, if absent, separately reported recognized compensation expense; the latter never becomes an FCF adjustment. Nonpositive net income scores 0 for cash conversion; absent income/FCF stays unavailable. ROIC remains undefined for nonpositive invested capital; the explicit asset-return alternative does not change the ROIC chart. Missing financial inputs alone never trigger an alternative. Does not establish acquisition quality or buyback timing.
- 3-year average dilution (%)
- -3.28
- 3-year average SBC / revenue (%)
- 0.10
- cashConversionGrade
- 100.00
- operatingAssetReturn
- 4.06
Management63
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
capital discipline · 2/4 · Fiscal 2026 operating cash flow of $5.174 billion accompanied $649 million of capital expenditures and approximately $1.4 billion of completed repurchases. Solaris cost approximately $1.9 billion, with roughly $1.0 billion of debt proceeds supporting it and general purposes. The $184 million Navista & ION impairment offsets these funding achievements; acquisition returns remain unproven.
incentive alignment · 3/4 · All five listed executives exceeded disclosed ownership targets at June 30, 2026. Actual multi-year PSU settlement and restrictions on hedging and pledging support alignment. Ownership calculations include unvested RSUs, and incentive cash flow excludes specified Solaris effects. These qualifications prevent an exceptional grade without negating demonstrated alignment mechanisms.
execution · 2/4 · Operating earnings growth, generics-program contribution and growth from existing customers support execution indirectly through reported operating outcomes. Acquisition contributions limit attribution to underlying improvements. The Navista & ION impairment and continuing tariff pressure are realized shortcomings, supporting a mixed assessment rather than adopting management's favorable performance characterization.
governance · 3/4 · An independent non-executive Chair, independent membership of all four standing committees and a formal annual evaluation facilitated by a third party support strong oversight architecture. These are disclosed current practices, not proof of exceptional board effectiveness. The supplied catalog does not establish the prior analysis's audit-service or internal-control assurance claims.
Evidence
Red Oak Sourcing, LLC ("Red Oak Sourcing"), a U.S.-based generic pharmaceutical sourcing venture with CVS Health, negotiates generic pharmaceutical supply contracts on behalf of both companies.
Fiscal 2026 Form 10-K, filed August 11, 2026; Business—Sourcing Venture with CVS Health Corporation · Filed 11/08/2026
The term of Red Oak Sourcing extends through June 2029.
Fiscal 2026 Form 10-K, filed August 11, 2026; Business—Red Oak term · Filed 11/08/2026
Generics Program
The performance of our Pharma segment generics program positively impacted the year-over-year comparison of Pharma segment profit during fiscal 2026.
Fiscal 2026 Form 10-K, filed August 11, 2026; MD&A—Generics Program · Filed 11/08/2026
The Pharma segment generics program includes, among other things, the impact of generic pharmaceutical product launches, customer volumes, pricing changes, the Red Oak Sourcing, LLC venture ("Red Oak Sourcing") with CVS Health Corporation ("CVS Health"), and generic pharmaceutical contract manufacturing and sourcing costs.
Fiscal 2026 Form 10-K, filed August 11, 2026; MD&A—Generics Program components · Filed 11/08/2026
Our earnings on generic pharmaceuticals are generally highest during the period immediately following the initial launch of a product, because generic pharmaceutical selling prices are generally highest during that period and tend to decline over time.
Fiscal 2026 Form 10-K, filed August 11, 2026; Business—generic pharmaceutical earnings and selling prices · Filed 11/08/2026
•McKesson OneStop Generics® – Generic pharmaceutical purchasing program that helps pharmacies maximize their cost savings with a broad selection of generic drugs, competitive pricing, and one-stop shopping.
McKesson fiscal 2026 Form 10-K, filed May 8, 2026; Business—OneStop Generics; competitor offering only · Filed 08/05/2026
Cencora is one of the largest global pharmaceutical sourcing and distribution services companies, helping both healthcare providers and pharmaceutical and biotech manufacturers improve patient access to products and enhance patient care.
Cencora fiscal 2025 Form 10-K, filed November 25, 2025; Business—sourcing and distribution; competitor description only · Filed 25/11/2025
Our U.S. human health distribution businesses compete with both McKesson and Cardinal, as well as national generic distributors and regional distributors within pharmaceutical distribution.
Cencora fiscal 2025 Form 10-K, filed November 25, 2025; Competition—explicit competition with McKesson and Cardinal · Filed 25/11/2025
▪maintains prime vendor relationships that streamline the purchasing process, resulting in greater efficiency and lower costs for our retail, hospital, and other healthcare provider customers;
Fiscal 2026 Form 10-K, filed August 11, 2026; Business—prime-vendor relationships · Filed 11/08/2026
▪provides services to pharmaceutical manufacturers, including distribution, inventory management, data reporting, new product launch support, and chargeback administration;
Fiscal 2026 Form 10-K, filed August 11, 2026; Business—manufacturer distribution and support services · Filed 11/08/2026
Revenue for fiscal 2026 increased 14 percent to $254.2 billion from the prior year, primarily due to branded and specialty pharmaceutical sales growth from existing and new customers.
Fiscal 2026 Form 10-K, filed August 11, 2026; MD&A—revenue growth attribution · Filed 11/08/2026
6
Cardinal Health | Fiscal 2025 Form 10-K
MD&A
Overview
Pharmaceutical and Specialty Solutions Segment
OptumRx Contracts
In April 2024, we announced that our pharmaceutical distribution contracts with OptumRx would expire at the end of June 2024.
Fiscal 2025 Form 10-K, filed August 12, 2025; MD&A—OptumRx contract expiration · Filed 12/08/2025
Sales to OptumRx generated 17 percent of our consolidated revenue in fiscal 2024.
Fiscal 2025 Form 10-K, filed August 12, 2025; MD&A—OptumRx share of fiscal 2024 consolidated revenue · Filed 12/08/2025
The expiration of the OptumRx contracts and unwinding of the negative net working capital associated with the contracts adversely impacted our results of operations, including segment profit, financial condition, and cash flows, during fiscal 2025.
Fiscal 2025 Form 10-K, filed August 12, 2025; MD&A—realized effects of OptumRx expiration · Filed 12/08/2025
Additionally, we furnish healthcare providers and pharmaceutical manufacturers with an assortment of related services, including data analytics, outcomes research, reimbursement and pharmaceutical consulting services (including regulatory affairs, development consulting and scientific affairs, pharmacovigilance, and quality management and compliance) niche premium logistics services, inventory management, pharmacy automation, pharmacy management, and packaging solutions.
Cencora fiscal 2025 Form 10-K, filed November 25, 2025; Business—related services; competitor offering only · Filed 25/11/2025
tariffs imposed or threatened to be imposed on goods, materials, and products imported into the United States from countries where we do business and any retaliatory actions taken by such countries have resulted in us incurring substantial additional costs to source products and materials, directly and indirectly, from affected countries, resulting in raising prices on certain products and evaluating alternative sources of supply.
Fiscal 2026 second-quarter Form 10-Q, filed February 5, 2026; MD&A—tariff costs and actual price increases · Filed 05/02/2026
We are still incurring increased costs from tariffs, and if we are not successful at increasing prices to customers, our financial results will continue to be negatively impacted.
Fiscal 2026 third-quarter Form 10-Q, filed April 30, 2026; MD&A—continuing tariff costs and conditional price mitigation · Filed 30/04/2026
Our compensation typically is a percentage of the wholesale acquisition cost that is set by manufacturers.
Fiscal 2026 Form 10-K, filed August 11, 2026; Business—manufacturer-set wholesale acquisition cost compensation basis · Filed 11/08/2026
Since that time, we have taken actions to partially mitigate these impacts, including implementing certain price increases and evolving our pricing and commercial contracting processes to provide us with greater pricing flexibility.
Fiscal 2024 Form 10-K, filed August 14, 2024; MD&A—GMPD mitigation and contracting changes · Filed 14/08/2024
GAAP operating earnings for fiscal 2026 increased 15% to $2.6 billion from the prior year.
Fiscal 2026 Form 10-K, filed August 11, 2026; MD&A—annual GAAP operating earnings · Filed 11/08/2026
The increase in GAAP operating earnings was driven by the increased contribution from branded and specialty pharmaceuticals and the performance of our generics program in our Pharma segment, the impact of the acquisitions of MSO platforms and ADS, and growth from existing customers in our GMPD segment.
Fiscal 2026 Form 10-K, filed August 11, 2026; MD&A—operating earnings growth drivers · Filed 11/08/2026
The Inflation Reduction Act has and will continue to adversely impact our revenue by capping prices for certain drugs; however, our profitability has not been negatively impacted.
Fiscal 2026 Form 10-K, filed August 11, 2026; MD&A—realized IRA revenue and profitability effects · Filed 11/08/2026
Non-GAAP diluted EPS increased 40% to $2.91, reflecting the increase in non-GAAP earnings, including the recognition of a one-time net operating profit impact of IEEPA tariff refunds of $100 million in the GMPD segment, a lower non-GAAP effective tax rate, and a lower share count, partially offset by an increase in interest and other expense.
Fiscal 2026 earnings release, filed August 11, 2026; fourth-quarter EPS drivers and one-time GMPD tariff refund impact · Filed 11/08/2026
GAAP / Non-GAAP Reconciliation - GAAP Cash Flow to Non-GAAP Adjusted Free Cash Flow (Unaudited)
Fiscal Year
(in millions)
2026
2025
GAAP - Cash Flow Categories
Net cash provided by operating activities
$
5,174
$
2,397
Net cash used in investing activities
(2,584)
(5,593)
Net cash provided by/(used in) financing activities
(1,602)
1,940
Effect of exchange rates changes on cash and equivalents
(6)
(3)
Net increase/(decrease) in cash and equivalents
$
982
$
(1,259)
Non-GAAP Adjusted Free Cash Flow
Net cash provided by operating activities
$
5,174
$
2,397
Repurchases of liability-classified Specialty Alliance Units
45
19
Additions to property and equipment
(649)
(547)
Payments related to matters included in litigation (recoveries)/charges, net
401
619
Non-GAAP Adjusted Free Cash Flow
$
4,971
$
2,488
For more information on these measures, refer to the Use of Non-GAAP Measures and Definitions schedules.
Fiscal 2026 earnings release, filed August 11, 2026; Schedule 6—annual GAAP operating cash flow, capital expenditures and adjusted free cash flow reconciliation · Filed 11/08/2026
•Incremental $350 million share repurchase completed, bringing fiscal year 2026 repurchase total to $1.4 billion, with $5.0 billion incremental repurchase authorization approved by board of directors
Fiscal 2026 earnings release, filed August 11, 2026; completed annual repurchases and incremental authorization · Filed 11/08/2026
Solaris Health Acquisition
On November 3, 2025, we, through The Specialty Alliance, completed the acquisition of Solaris Health, a urology MSO, for a purchase price of approximately $1.9 billion in cash, subject to certain adjustments.
Fiscal 2026 third-quarter Form 10-Q, filed April 30, 2026; MD&A—completed Solaris Health acquisition · Filed 30/04/2026
We issued new long-term debt and received net proceeds of approximately $1.0 billion to fund a portion of the consideration paid in connection with the Solaris Health acquisition and for general purposes.
Fiscal 2026 third-quarter Form 10-Q, filed April 30, 2026; MD&A—debt financing for Solaris Health and general purposes · Filed 30/04/2026
This increase was partially offset by the $184 million pre-tax goodwill impairment charge recognized in fiscal 2026 related to the Navista & Integrated Oncology Network ("ION") reporting unit within our Pharma segment, higher cash and share-based compensation costs resulting from the timing of acquisitions within The Specialty Alliance, and $171 million of net recoveries in class action antitrust litigation recognized in fiscal 2025.
Fiscal 2026 Form 10-K, filed August 11, 2026; MD&A—Navista & ION impairment and other earnings offsets · Filed 11/08/2026
•PSUs for the fiscal 2024 through fiscal 2026 performance cycle (the “Fiscal 24-26 PSUs”) settled at 236% based on over-performance against financial goals, with an upward 20% modifier applied based on our total shareholder return (“TSR”) finishing in the top quintile of the S&P 500 Health Care Index.
2026 proxy statement, filed September 21, 2026; Compensation Discussion and Analysis—actual fiscal 2024–2026 PSU settlement · Filed 21/09/2026
Stock Ownership Policy
Target Ownership
Actual Ownership(1)
Name
Multiple of
Base Salary
Multiple
Expressed in
Dollars
Multiple of
Base Salary
Value of
Shares Held by
Executive in
Dollars
Hollar
6
9,000,000
28.1
42,150,000
Alt
4
3,600,000
6.2
5,565,486
Mason
4
3,060,000
7.0
5,372,018
Weitzman
4
3,100,000
14.4
11,143,828
Mayer
3
2,235,000
9.7
7,255,490
(1)Actual ownership is stated as of June 30, 2026, using fiscal 2026 salary levels.
2026 proxy statement, filed September 21, 2026; Stock Ownership Policy—actual ownership at June 30, 2026 and targets · Filed 21/09/2026
We count common shares, unvested RSUs, and vested but deferred RSUs and PSUs as shares owned for purposes of the stock ownership guidelines.
2026 proxy statement, filed September 21, 2026; ownership guideline definition · Filed 21/09/2026
No hedging or pledging of company stock by directors and executive officers
Compensation clawback policies
No “single trigger” change of control arrangements
Longstanding, proactive shareholder engagement program and history of responsiveness
2026 proxy statement, filed September 21, 2026; executive compensation governance restrictions · Filed 21/09/2026
Non-GAAP adjusted free cash flow (for the Fiscal 2026 Annual Cash Incentive and the Fiscal 26-28 PSUs) is non-GAAP adjusted free cash flow adjusted to exclude the operating cash flow of the Solaris Health business as well as the cash flow used for certain unbudgeted integration, financing, and transaction costs associated with this acquisition.
2026 proxy statement, filed September 21, 2026; Annex A—acquisition exclusions in incentive cash-flow measure · Filed 21/09/2026
•Board-selected independent, non-executive Chair with robust duties.
2026 proxy statement, filed September 21, 2026; Governance and Board Highlights—independent non-executive Chair · Filed 21/09/2026
•All members of the four standing committees of the Board are independent.
2026 proxy statement, filed September 21, 2026; Governance and Board Highlights—standing committee independence · Filed 21/09/2026
•Through a formal annual evaluation process, which is facilitated by an experienced third party, the Board assesses its effectiveness and generates an action plan based on feedback from directors and management.
2026 proxy statement, filed September 21, 2026; Governance and Board Highlights—annual evaluation process · Filed 21/09/2026
