Key Takeaways
- Medline shares jumped 18% after a third-quarter beat, a raised sales outlook and a $1 billion buyback.
- Organic sales grew 10.5%, faster than the med-surg businesses at Cardinal Health and McKesson.
- Without $81 million of tariff refunds, adjusted EBITDA grew about 2%, against the 11.8% reported.
- The cash is there for the buyback, but profit growth has to catch up with sales.
Medline (MDLN) shares jumped 18% this morning after it beat third-quarter estimates, raised its sales outlook and announced a $1 billion buyback.
Its rivals’ med-surg businesses at Cardinal Health (CAH) and McKesson (MCK) shrank or grew in the low single digits in their latest quarters.
Take out the refunds
Net sales rose 10.4% to $7.86 billion, with organic sales up 10.5%. Analysts had expected $7.72 billion. Adjusted EPS was 44 cents, against 35 cents expected. Medline now expects 2026 organic growth of 10.0%-10.5%, up from 9.0%-10.0%.
Profit is murkier. Adjusted EBITDA rose 11.8% to $960 million. That includes $81 million of net refunds of IEEPA tariffs, which the Supreme Court struck down in February. Take those out, and it was $879 million, up about 2%. GAAP net income slipped 1.2% to $318 million.
Supply Chain Solutions grew sales 13.9%, but its adjusted EBITDA fell 10.2% to $184 million as its margin slipped to 4.4% from 5.5%.
Going into the report, analysts expected normalized EPS to rise from $1.32 in 2025 to $1.54 this year, then barely move in 2027:
With $1.27 of adjusted EPS in through nine months, this year’s estimate should rise. I see less reason to raise next year’s: Medline kept its $3.3-$3.4 billion EBITDA outlook, which leaves the refunds out.
TIKR tracks 27 analysts on Medline. How many say “Buy”?
See the full breakdown of Buy, Hold, and Sell ratings on Medline, along with Wall Street’s revenue and earnings estimates, all in one place. More than 500,000 investors use TIKR to research stocks like this one. See Medline’s Analyst Ratings
Rivals have questions to answer
Cardinal’s medical products and distribution segment went the other way in its quarter to June. Revenue fell 2% to $3.1 billion on lower distribution volumes, and $100 million of tariff refunds made up most of its $150 million profit. It reports later this week. Is Medline’s growth coming out of Cardinal’s volumes?
McKesson’s Medical-Surgical Solutions revenue grew 4% to $2.8 billion in the quarter to June, while adjusted operating profit fell 20%. McKesson plans to spin it off as Wellverse, which will have to show it can keep up with Medline.
Less cheap after today
Before today’s jump, Medline traded at 23x forward earnings. That’s near its 22x low since its January IPO and below its 28x average:
At today’s price, it’s about 26x.
Nine-month free cash flow of $1.8 billion, refunds included, easily covers the buyback, and Medline prepaid $750 million of its term loan in October. Until Supply Chain Solutions’ margins stop shrinking, though, that multiple looks like a full price to me.
Of course, the fourth-quarter report early next year will show us whether that margin has turned.
So what is Medline stock actually worth?
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Disclaimer:
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