Cencora (COR) Down 1.9% Since Last Earnings Report: Can It Recover?

A month has passed since Cencora’s (COR) last earnings report. Shares have lost about 1.9% in that time, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Cencor due for a breakout? Before we dive into how investors and analysts have reacted as of late, let’s take a quick look at the most recent earnings report in order to better understand the important catalysts.

Cencora’s Best Estimates for Q2 Earnings, Growth in 2024

Cencora reported fiscal second-quarter 2024 adjusted earnings per share (EPS) of $3.80, which represented growth of 4.1%, better than the Zacks Consensus Estimate of 3.65. The financial result also improved by 21% year-on-year.

GAAP EPS was $2.09, up 27.9% year-over-year.

Revenue details

Revenue was $68.4 billion, up 7.8% year-over-year. However, the top line missed the Zacks Consensus Estimate by 2.8%.

Segment analysis

US Healthcare Solutions

Revenue in this segment was $61.3 billion, up 8.1% year-over-year. This improvement was due to overall market growth and increased sales of specialty products. Strong demand for recently approved GLP-1 drugs for the treatment of diabetes and/or weight loss helped accelerate growth this quarter. Rising demand for Covid-19 vaccines has also boosted sales.

Segment operating income was $841.1 million, up 11.2% year-over-year. The increase was driven by higher gross profit (including fees obtained from the distribution of government drugs for Covid-19 and gross profit from sales to specialist doctors’ offices).

International healthcare solutions

This segment includes Alliance Healthcare, World Courier, Innomar and Profarma Specialty.

Revenues were $7.1 billion, up 5.3% year-over-year due to increased sales in European and Canadian distribution. The top line rose 9.8% at constant currency (cc).

Total operating income was $192.7 million, up 9.5% reported and 22.1% cc. Strong growth was driven by new product additions, the acquisition of PharmaLex last year and strong business performance in Canada.

Margin analysis

Cencora reported gross profit of $2.54 billion, up 12.5% year-over-year. As a percentage of revenue, gross margin was 3.71%, up 9 basis points (bps) year-over-year.

The company reported operating income of $553.3 million, up 14.4% year-over-year. As a percentage of revenue, operating margin was 0.81%, down 7 basis points from the year-ago quarter.

Financial position

COR ended the fiscal second quarter with cash and cash equivalents of $2.29 billion, compared to $2.87 billion in the prior-year quarter.

Total net cash used in operating activities was $6.7 million compared to $1.34 billion a year earlier.

Dividend update

During this quarter, Cencora’s board of directors declared a quarterly dividend of 51 cents per share, payable on May 24, 2024, to shareholders of record on May 10, 2024.

Guidelines raised

The company raised its fiscal 2024 earnings and revenue outlook.

Adjusted EPS is now estimated in the range of $13.30-$13.50 (previously $13.25-$13.50), indicating growth of 10.5-12.6% from year-ago levels. The Zacks Consensus Estimate for this stock is currently $13.43.

Revenues are expected to grow by 10-12%, similar to cc. US healthcare solutions revenues are currently expected to grow 11-13% (previously 7-10%). Revenues in the International Healthcare solutions division are expected to grow by 4-7%.

Adjusted operating profit is expected to improve by 9-11% (previously 8-10%).

U.S. Healthcare Solutions segment operating income is now forecast to grow 10-12% (previously 9-11%). In the International Healthcare Solutions segment, the company maintained its forecast of 5-8%.

How have estimates changed since then?

Last month, investors saw a downward trend in new estimates.

VGM results

At this point, Cencora has an average Growth Score of C, although it lags slightly behind its Momentum Score of D. However, the stock is rated an A on the value side, putting it in the top quintile of this investment strategy.

Overall, the stock has a Total VGM Score of B. If you’re not focused on one strategy, this score should interest you.

Perspectives

Estimates for this company are generally on a downward trend, and the magnitude of these revisions indicates a downward shift. Notably, Cencora carries a Zacks Rank #3 (Hold). We expect a linear rate of return on the stock over the next few months.

Industry player performance

Cencora belongs to the Zacks Medical Services industry. Another stock in the same industry, Revvity (RVTY), has gained 7.2% over the past month. More than a month has passed since the company announced its results for the quarter ended March 2024.

In the most recent quarter, Revvity reported revenue of $649.92 million, representing a year-over-year change of -3.7%. EPS of $0.98 for the same period compared to $1.01 a year ago.

For the current quarter, Revvity is expected to report earnings per share of $1.14, which would represent a year-over-year change of -5.8%. Over the past 30 days, the Zacks Consensus Estimate has moved +2.4%.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Revvity. The stock also has a VGM Rating of D.

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