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Cardinal Health, McKesson decline after declared by Morgan Stanley as most at risk in case of Amazon

Monday, November 20, 2017  
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Published: Nov 20, 2017 10:58 a.m. ET - Emma Court - Market Watch -

Cardinal Health Inc. CAH, -4.41% shares declined 3.4% in premarket trade Monday and McKesson Corporation MCK, -3.55% shares declined 2.4% after Morgan Stanley said they were two of the companies most at risk if Amazon expands into health care.

Cardinal Health would face the most risk if Amazon gets into medical supply distribution, followed by McKesson "to lesser degree," the Morgan Stanley report said. Walgreens WBA, -1.66% and CVS Health Corp. CVS, -0.96% would be most at risk if Amazon gets into pharmacy, the report found, company shares declined 1.6% and 0.8% respectively on Monday.

In the case of an Amazon expansion into tools and diagnostics distribution, Thermo Fisher Scientific's Fisher division TMO, +0.46%Henry Schein HSIC, -3.11% and Patterson PDCO, -3.75% would be most at risk, according to Morgan Stanley; shares of the companies rose 0.5% and declined 2% and 2.6% respectively on Monday. Cardinal Health's earnings exposure risk is about 22% to McKesson's 9%, the Morgan Stanley report said.

"Optically, revenue exposure is limited, but the fixed cost nature of the distribution model creates a greater headwind to earnings than appreciated," the report said. Cardinal Health shares have dropped 13.6% over the last three months, compared with a 6.4% rise in the S&P 500 SPX, +0.15% and a 7.8% rise in the Dow Jones Industrial AverageDJX, +0.38%


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