COR Q2 Earnings & Revenues Beat Estimates, '25 EPS Guidance Raised

Cencora, Inc. COR reported second-quarter fiscal 2025 adjusted earnings per share (EPS) of $4.42, which beat the Zacks Consensus Estimate of $4.08 by 8.3%. The bottom line also improved 16.3% year over year.

GAAP EPS was $3.68, up 76.1% from the year-ago period’s level. The significant gain was primarily driven by robust top-line growth. (Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.)

Revenue Details

Revenues totaled $75.45 billion, up 10.3% year over year. The top line beat the Zacks Consensus Estimate by 0.8%.

Cencora, Inc. Price, Consensus and EPS Surprise

Cencora, Inc. price-consensus-eps-surprise-chart | Cencora, Inc. Quote

Segmental Analysis

U.S. Healthcare Solutions

Revenues in this segment totaled $68.3 billion, up 11.4% on a year-over-year basis. This improvement was driven by overall market growth on increased unit volume, including improved sales of GLP-1 drugs and specialty products.

Segmental operating income totaled $1 billion, up 22.8% year over year. Higher gross profit (including fees earned from distributing government-owned COVID-19 treatments and gross profit on sales to specialty physician practices) contributed to the upside, partly offset by increased operating expenses.

International Healthcare Solutions

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

Revenues amounted to $7.2 billion, up 0.7% year over year. The top line increased 5.7% at constant currency (cc).

Operating income totaled $159.3 million, down 17.3% on a reported basis and 13.9% at cc. The reported decline was due to lower operating income at COR’s global specialty logistics and European distribution businesses.

Margin Analysis

Cencora reported an adjusted gross profit of $2.9 billion, up 15.2% on a year-over-year basis. As a percentage of revenues, the adjusted gross margin was 3.9%, up 16 basis points (bps) year over year.

The company recorded an adjusted operating income of $1.2 billion, up 15.3% year over year. As a percentage of revenues, the adjusted operating margin was 1.6%, which expanded 7 bps from the year-ago quarter’s level.

Financial Update

COR exited the fiscal second quarter with cash and cash equivalents worth $1.98 billion compared with $3.22 billion in the previous quarter.

Cumulative net cash used in operating activities totaled $632.5 million against $6.7 million in net cash provided by operating activities a year ago.

Dividend Update

Cencora's board of directors declared a quarterly dividend of 55 cents per share. The new dividend is payable on June 2, 2025, to shareholders of record at the close of business on May 16, 2025.

FY25 Guidance

The company updated its previous outlook for fiscal 2025 earnings and revenues, reflecting stronger earnings growth in the U.S. Healthcare Solutions segment and a lower contribution from the International Healthcare Solutions segment.

Adjusted EPS is now estimated to be in the $15.70-$15.95 range, up from the previous guidance of $15.30-$15.60. The Zacks Consensus Estimate for the same is pegged at $15.37.

Revenues are now projected to rise 3-4% for the International Healthcare solutions business, down from previous guidance of 4-5%. On a cc basis, the International Healthcare Solutions segment revenue growth is expected to be in the range of 6-8%, down from the previous range of 7-9%.

Adjusted operating income is expected to improve 13.5-15.5% for fiscal 2025, up from the earlier guidance of 11.5-13.5%.

Operating income for the U.S. Healthcare Solutions segment is now expected to improve 17.5-19.5% (previously 14.5-16.5%), while the same for the International Healthcare Solutions business is estimated to decline 1-4% (previously flat growth) and 0-3% at cc.

Our Take

Cencora exited the fiscal second quarter on a strong note, wherein its earnings and revenues beat the Zacks Consensus Estimate. The company’s EPS guidance for fiscal 2025 was also above estimates. So far this year, COR’s shares have gained 29.4% against the industry’s decline of 3%. The S&P 500 Index was down 5% in the same time period.

The company continues to witness robust segmental performance due to growth in all markets and strong demand for specialty products and GLP-1 drugs. Per management, Cencora delivered a solid performance by playing a crucial role in the healthcare system while maintaining efficiency throughout its business. The company has been focused on its priorities. It has thoughtfully deployed capital to deliver long-term growth.

The acquisition of RCS appears promising, as it is expected to become accretive to this fiscal year’s bottom line.

However, COR’s gross margin continues to be hurt by lower-margin GLP-1 drugs and the lack of exclusive COVID-19 therapy sales, which had higher margins. The company’s rising expenses to support business activities amid inflationary challenges put pressure on the operating margin. Cut-throat competition in the MedTech space is another headwind.

COR’s Zacks Rank & Other Key Picks

Some other top-ranked stocks from the same medical industry are AxoGen AXGN, Masimo MASI and CVS Health CVS.

AxoGen, carrying a Zacks Rank #2 at present, has an estimated growth rate of 76.9% for 2025. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

AXGN’s earnings beat estimates in each of the trailing four quarters, delivering an average surprise of 113.33%. AXGN’s shares have gained 1.9% so far this year.

Masimo, carrying a Zacks Rank of 2 at present, has an estimated growth rate of 20% for 2025.

MASI’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 14.41%. Its shares have risen 58.5% compared with the industry’s 3.9% growth year to date. MASI’s shares have lost 10.8% so far this year.

CVS Health, carrying a Zacks Rank #2 at present, has an estimated earnings growth rate of 11.4% for 2025.  The company’s earnings beat estimates in each of the trailing four quarters, delivering an average negative surprise of 18.08%. CVS’ shares have gained 46.9% so far this year.

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This article originally published on Zacks Investment Research (zacks.com).

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