Cardinal Health’s credit rating outlook is ‘positive,’ says Fitch

Cardinal Health Inc. (NYSE: CAH) continues to feel the love from credit ratings agencies, with Fitch upgrading the Ohio company’s outlook to “positive.”

Fitch attributed the change in Cardinal Health’s outlook to the company’s focus on paying down debt, and expected strong financial performance and disciplined acquisition activity over the next year, according to a statement from Fitch.

Last month, Standard & Poor’s revised its outlook on Cardinal to “positive” from “stable,” and Moody’s Investment Service revised the Dublin, Ohio company’s outlook to “stable” from “negative” in May.

Both agencies cited Cardinal Health’s better-than-expected cost savings and profit margins at a time when the company is dealing with operating challenges such as renewing contracts with its largest customers, absorbing lower prices from new customers, and spinning off its CareFusion clinical and medical products division a year ago.

Fitch also upgraded two types of Cardinal’s unsecured debt to “BBB+” from “BBB,” citing Cardinal’s pay-down of approximately $1.5 billion in debt and the relatively strong performance of its medical products distribution business. A “BBB” rating means a company’s credit has been judged to be “good” with its risk of default low.

This year’s federal health reform law isn’t expected to change Cardinal’s outlook, according to Fitch. On the positive side for Cardinal, the law is expected to increase prescription drug volume in the United States. On the negative side, the law likely will lead to lower reimbursement rates for drug manufacturers and distributors, compressing Cardinal’s margins, Fitch said.