- Revenue: $74.2 billion, up 11% year-over-year.
- Adjusted Diluted EPS: $3.34, representing a 14% increase year-over-year.
- Gross Profit: $2.4 billion, up 6% year-over-year.
- Gross Profit Margin: 3.19%, a decrease of 14 basis points year-over-year.
- Operating Expenses: $1.5 billion, up 6% year-over-year.
- Operating Income: $878 million, up 7% year-over-year.
- Net Interest Expense: $31 million, a decrease of 46% year-over-year.
- Effective Tax Rate: 21.0%, down from 21.5% year-over-year.
- Diluted Share Count: 200 million shares, a 2% decrease year-over-year.
- Cash Balance: $3.3 billion.
- Adjusted Free Cash Flow: $2.3 billion.
- US Healthcare Solutions Revenue: $67.2 billion, up 12% year-over-year.
- US Healthcare Solutions Operating Income: $698 million, up 10% year-over-year.
- International Healthcare Solutions Revenue: $7.1 billion, flat year-over-year (up 6% on a constant currency basis).
- International Healthcare Solutions Operating Income: $179 million, down 4% year-over-year (up 1% on a constant currency basis).
- GLP-1 Product Sales: Increased by $2.1 billion or 38% year-over-year.
- Full Year EPS Guidance: Raised to $13.55 to $13.65, representing growth of 13% to 14%.
- Full Year Revenue Growth Guidance: Approximately 12%.
- Full Year Adjusted Operating Income Growth Guidance: 10% to 11%.
- Full Year Net Interest Expense Guidance: $170 million to $190 million.
- Full Year Adjusted Free Cash Flow Guidance: $2.5 billion to $3 billion.
Release Date: July 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Cencora Inc (COR, Financial) reported quarterly revenue of over $74 billion, representing a year-over-year growth of 11%.
- Adjusted diluted EPS increased by 14% to $3.34, showcasing strong financial performance.
- The company raised its full-year outlook, indicating confidence in continued growth and execution against its pharmaceutical-centric strategy.
- Cencora's specialty distribution and services offerings have shown strong growth, particularly in oncology and ophthalmology.
- The company has made forward-thinking investments in infrastructure and emerging technologies, positioning itself well for future growth.
Negative Points
- Gross profit margin decreased by 14 basis points compared to the prior year quarter, impacted by the reacceleration of low-margin GLP-1 product sales.
- International Healthcare Solutions segment saw a decrease in operating income by 4% on an as-reported basis due to higher IT expenses and lower operating income in global specialty logistics.
- The company is facing some softness in demand at Pharmexx, impacting the international segment's performance.
- There are concerns about the impact of Walgreens Boots Alliance's strategic changes on Cencora's business, given the significant partnership between the two companies.
- The company expects very little contribution from commercial COVID therapies in the fourth quarter, which could impact year-over-year comparisons.
Q & A Highlights
Q: Bob, any change in the philosophy of how you think about whether it's giving guidance to the street or any of the growth metrics?
A: (Bob Mauch, EVP and COO) No changes in strategy or guidance philosophy. We will continue with the current approach, which has been effective.
Q: Jim, can you provide some headwinds and tailwinds to consider for fiscal 2025?
A: (Jim Cleary, EVP and CFO) Key factors include growth in specialty products, positive utilization trends, timing of capital deployment, and comparisons to commercial COVID vaccine sales from fiscal 2024.
Q: How do you see the health of the market today and what could be positive or negative dynamics?
A: (Steve Collis, Chairman, President, and CEO) We see strong utilization trends, particularly in specialty products like oncology and ophthalmology. Brand inflation and generic deflation are in line with expectations.
Q: Can you talk about the Pharmexx business and its current cycle?
A: (Jim Cleary, EVP and CFO) We've seen some softness but also early positive indicators. We remain confident in our strategic decision to acquire the business.
Q: The gross margin was relatively flat year-over-year last quarter but seems to be declining now. Is this due to GLP-1 sales?
A: (Jim Cleary, EVP and CFO) Yes, the decline is primarily due to increased sales of lower-margin GLP-1 products and the mix of U.S. and international business.
Q: How are you differentiating yourself during contract renewals?
A: (Bob Mauch, EVP and COO) We focus on driving efficiency, improving service levels, and offering customized approaches to meet customer needs. Our balanced contracts help mitigate risks from market dynamics.
Q: Can you provide more detail on the sequential decline in operating income for fiscal Q4?
A: (Jim Cleary, EVP and CFO) We expect a decline due to lower contributions from COVID therapies and commercial vaccines compared to last year.
Q: How are you collaborating with Walgreens to drive value?
A: (Jim Cleary, EVP and CFO) We work closely with Walgreens to support their strategy and ensure successful outcomes, including managing store closures and other strategic initiatives.
Q: Can you detail some of the moving pieces in the international business?
A: (Jim Cleary, EVP and CFO) Higher IT expenses in European distribution and lower operating income in global specialty logistics impacted results. However, our Canadian business performed well.
Q: Have you seen any disruption from NASDAQ affecting your independent customers?
A: (Steve Collis, Chairman, President, and CEO) We have not seen specific requests related to NASDAQ. Our independent customers have been resilient, and we stay close to them to support their needs.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
