Analyst Note| Soo Romanoff |
Narrow-moat Cardinal Health reported strong second-quarter normalized EPS results that included over a $0.20 benefit from a notably lower effective tax rate of 14%. The balance of the upside was associated with improved leverage of fixed distribution costs with better-than-expected top-line growth in the medical segment. Management increased its guidance range by 3% from the midpoint, likely to reflect the improved scale. The tone of the earnings discussion was neutral when compared with the upbeat conversations of the other two leading distributors, which may be a function of the transition of the company's new CFO and numerous other moving parts. We maintain our previous estimates (at the high end of previous guidance but at midpoint of new guidance) and fair value estimate of $60 per share.