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

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

Will the recent negative trend continue leading up to its next earnings release, or is Cencora 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 get a better handle on the important catalysts.

Cencora Q2 Earnings Top Estimates, 2024 View Raised

Cencora, reported second-quarter fiscal 2024 adjusted earnings per share (EPS) of $3.80, which beat the Zacks Consensus Estimate of 3.65 by 4.1%. The bottom line also improved 21% year over year.

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GAAP EPS was $2.09, up 27.9% from that reported in the year-ago period.

Revenue Details

Revenues totaled $68.4 billion, up 7.8% year over year. The top line, however, missed the Zacks Consensus Estimate by 2.8%.

Segmental Analysis

U.S. Healthcare Solutions

Revenues in this segment totaled $61.3 billion, up 8.1% on a year-over-year basis. This improvement was due to overall market growth and increased specialty product sales. High demand for the recently approved GLP-1 drugs for diabetes and/or weight loss has helped accelerate growth during the quarter. A rising demand for COVID-19 vaccines also boosted sales.

Segmental operating income totaled $841.1 million, up 11.2% year over year. Higher gross profit (including fees earned from the distribution of government-owned COVID-19 treatments and gross profit on sales to specialty physician practices) contributed to the upside.

International Healthcare Solutions

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

Revenues totaled $7.1 billion, up 5.3% year over year on the back of increased sales in its European distribution and Canadian businesses. The top line increased 9.8% at constant currency (cc).

Operating income totaled $192.7 million, up 9.5% reportedly and 22.1% at cc. The strong growth was driven by the addition of products, along with the acquisition of PharmaLex last year and strong Canadian business performance.

Margin Analysis

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

The company recorded an operating income of $553.3 million, up 14.4% year over year. As a percentage of revenues, the operating margin was 0.81%, which contracted 7 bps from the year-ago quarter’s number.

Financial Position

COR exited the fiscal second quarter with cash and cash equivalents worth $2.29 billion compared with $2.87 billion in the prior-quarter quarter.

Cumulative net cash used in operating activities totaled $6.7 million compared with $1.34 billion a year ago.

Dividend Update

During the quarter, Cencora's board of directors declared a quarterly dividend of 51 cents per share, payable on May 24, 2024, to shareholders of record at the close of business on May 10, 2024.

Guidance Raised

The company raised its outlook for fiscal 2024 earnings and revenues.

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% over the prior-year level. The Zacks Consensus Estimate for the same is currently pegged at $13.43.

Revenues are projected to increase 10-12%, reportedly as well as at cc. The top line at the U.S. Healthcare Solutions segment is now expected to grow 11-13% (previously 7-10%). Revenues at the International Healthcare solutions business are estimated to be up 4-7%.

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

Operating income at the U.S. Healthcare Solutions segment is now projected to grow 10-12% (previously 9-11%). For the International Healthcare Solutions segment, the company maintained its guidance at 5-8%.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

At this time, Cencora has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Cencora has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

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

Revvity reported revenues of $649.92 million in the last reported quarter, representing a year-over-year change of -3.7%. EPS of $0.98 for the same period compares with $1.01 a year ago.

Revvity is expected to post earnings of $1.14 per share for the current quarter, representing a year-over-year change of -5.8%. Over the last 30 days, the Zacks Consensus Estimate has changed +2.4%.

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

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