Analyst Note| Karen Andersen, CFA |
Narrow-moat Cardinal Health posted moderate fiscal third-quarter earnings in which a higher brand mix cushioned the impact of weak generic distribution revenue. Normalized earnings came in slightly above our expectations on both sequential and yearly bases. Compared with the fiscal second quarter, net income declined by 11%, and net margin declined by 7 basis points to 1.15%. Management expects a full recovery of branded pharmaceuticals by the end of the fiscal year based on encouraging trends in the last few months, though generics volume will remain diminished beyond this. Fiscal EPS guidance was narrowed to $5.90-$6.05 from $5.85-$6.10. We maintain our fair value estimate of $60 per share.