Cardinal Health Shows Resilience Amid Cost Inflation; Raising FVE to $67

We are raising our fair value estimate on narrow-moat Cardinal Health to $67 from $52 per share after diving deeper into our assumptions and coming away with a more favorable outlook for the company overall. We have also factored in its strong fourth-quarter performance. Results in the firm’s core distribution business were consistent with rebounding prescription drug volume and primary-care patient visits. Meanwhile, the impact of cost inflation was less severe than anticipated, which we believe signals a more positive start to 2023. Management’s guidance for next year includes low-double-digit revenue growth and low-single-digit profit growth in the distribution segment. We expect supply headwinds will be strongest in the first half of the year.