Cencora Q1 Earnings Call Highlights

Key Points

• OneOncology acquisition: Cencora increased its ownership in OneOncology from 35% to 92%, folding the MSO into its strategy alongside Retina Consultants of America to expand community oncology support; management said OneOncology should be roughly EPS-neutral in its first 12 months (net of financing costs).
• Q1 results and raised guidance: Adjusted diluted EPS was $4.08 (up 9%) on $85.9 billion revenue (up 5.5%), with strong U.S. Healthcare Solutions performance and management raising fiscal‑2026 revenue growth guidance to 7%–9% and consolidated operating income growth to 11.5%–13.5% while reaffirming the full‑year EPS range of $17.45–$17.75.
• Financing and cash priorities: Cencora boosted interest‑expense guidance to $480–500 million after borrowing to fund the acquisition, paused share repurchases to prioritize debt paydown, and reported negative adjusted free cash flow of $2.4 billion for the quarter while expecting about $3 billion of adjusted free cash flow for the full year as working capital normalizes.

Cencora NYSE: COR reported a strong start to fiscal 2026 and raised key elements of its full-year outlook after completing the acquisition of a majority stake in OneOncology. Management highlighted continued momentum in the company’s U.S. Healthcare Solutions segment, benefits from its pharmaceutical-centric MSO strategy, and improving trends in global specialty logistics, while noting some timing-related pressure in international distribution profitability during the quarter.

OneOncology deal closes; MSO strategy emphasized

President and CEO Bob Mauch said the company completed its acquisition of the “majority of the remaining equity interest” in OneOncology, welcoming CEO Dr. Jeff Patton and the OneOncology team. Mauch described community oncology support as a cornerstone of Cencora’s strategy and positioned the deal as part of a broader MSO expansion that includes Retina Consultants of America (RCA), which joined Cencora about a year ago.

Mauch said Cencora’s MSOs provide physician practices with back-office and administrative support while strengthening relationships with pharmaceutical manufacturers. He also outlined three strategic growth priorities:

• Strengthening leadership in specialty
• Leading with market leaders
• Enhancing patient access to pharmaceuticals

On RCA, management highlighted its clinical trial and research capabilities and said RCA contributes to more than one-third of all retina clinical trial research conducted in the U.S. Mauch also cited the deployment of “hundreds of advanced imaging devices” across RCA practices to support patient assessment and experience. He pointed to physician activity at medical conferences and described examples of physician leadership, including RCA’s research chair participating in what was described as the world’s first procedure of a new FDA-approved cell-based gene therapy for MacTel type 2, as well as early biosimilar adoption supported by physician familiarity and confidence.

Fiscal Q1 results: EPS up 9% as revenue rises 5.5%

Executive Vice President and CFO Jim Cleary said first-quarter adjusted diluted EPS was $4.08, up 9% year over year, driven by performance in U.S. Healthcare Solutions. Consolidated revenue was $85.9 billion, up 5.5%, with growth in both reportable segments and in the company’s “Other” category.

Cleary said U.S. GLP-1 product sales increased by $1 billion, or 11%, compared with the prior-year quarter. Consolidated gross profit was $3.0 billion, up 18%, while gross profit margin increased 37 basis points to 3.48%, which management attributed to the January 2025 acquisition of RCA.

Operating expenses rose about 22% to $1.9 billion, driven primarily by the RCA acquisition and investments to support revenue growth. Adjusted operating income increased 12% to $1.1 billion.

Net interest expense was $72 million, up $44 million year over year, which Cleary attributed primarily to debt raised to finance part of the RCA acquisition. The effective income tax rate was 19% versus 20% a year earlier; the company expects a full-year fiscal 2026 effective tax rate of approximately 20%.

Cencora ended the quarter with $1.8 billion in cash. Adjusted free cash flow was negative $2.4 billion due to seasonal working capital needs, compared with negative $2.8 billion in the prior-year quarter. Cleary reiterated expectations for approximately $3 billion of adjusted free cash flow for the full fiscal year as working capital dynamics unwind.

Segment performance: U.S. strength offsets international profitability timing

In U.S. Healthcare Solutions, revenue rose 5% to $76.2 billion. Cleary said the quarter included more challenging comparisons due to a large grocery customer that was off-boarded in fiscal 2025 and the loss of an oncology customer in the fourth quarter of fiscal 2025 following that customer’s acquisition.

U.S. Healthcare Solutions operating income increased 21% to $831 million, driven by the RCA acquisition and continued specialty growth in health systems and physician practices, more than offsetting the headwind from the oncology customer loss. Cleary said health systems volumes and trends were “particularly good,” and that at RCA the company saw better-than-expected volume, strong research trends, and new physicians joining the platform.

International Healthcare Solutions revenue increased 10% as reported (6% constant currency) to $7.6 billion, driven primarily by European distribution. However, operating income declined 14% as reported (17% constant currency) to $142 million. Cleary said the decline was largely due to the timing of manufacturer price adjustments in a developing market country, partially offset by operating income growth in global specialty logistics. In response to analyst questions, he said the price adjustment occurred at the beginning of the first quarter last year but at the very end of the first quarter this year, characterizing the impact as timing-related.

In “Other,” revenue rose 6% to $2.1 billion, driven by growth at MWI Animal Health and ProFarma, partially offset by declines in legacy U.S. hub consulting services. Operating income in Other fell 6% to $91 million due primarily to lower operating income in U.S. hub consulting services, partially offset by growth at MWI.

Guidance raised: operating income growth outlook lifted; EPS reaffirmed

Management raised fiscal 2026 guidance to reflect both performance and the contribution from OneOncology. Cleary reaffirmed the full-year adjusted EPS range of $17.45 to $17.75, noting earlier expectations that results would trend toward the lower half of the range due to pausing share repurchases, but saying execution and segment performance supported maintaining the full range.

Revenue growth guidance increased to 7% to 9% from 5% to 7%. By segment, the company now expects:

• U.S. Healthcare Solutions revenue: 7% to 9% growth, including OneOncology MSO revenue and continued utilization trends
• International Healthcare Solutions revenue: 7% to 9% as reported, with constant-currency growth unchanged at 6% to 8%
• Other revenue: 1% to 5% growth, reflecting updated expectations for ProFarma and positive volume trends at MWI

Cleary raised consolidated operating income growth guidance to 11.5% to 13.5% from 8% to 10%. U.S. Healthcare Solutions operating income growth is now expected to be 14% to 16%, reflecting OneOncology and continued segment performance. He reiterated that OneOncology is expected to be “neutral, net of financing costs,” to adjusted diluted EPS in its first 12 months.

International operating income guidance was unchanged, with management expecting the first-quarter timing impact in European distribution to reverse in subsequent quarters. For Other, Cleary said the company now expects operating income to be flat year over year, citing the full impairment of depreciable assets in the U.S. consulting business as of Dec. 31, 2025, which eliminates future depreciation expense.

Financing, ownership details, and share repurchases

Cleary increased expected interest expense to $480 million to $500 million from $315 million to $335 million, primarily due to additional borrowings to fund the OneOncology acquisition. He also said the second fiscal quarter is typically the highest interest expense quarter due to seasonal working capital needs, and with OneOncology financing, second-quarter net interest expense is expected to be about double first-quarter interest expense.

Management said share repurchases have been paused due to the OneOncology acquisition as the company prioritizes debt paydown. Cleary said long-term capital deployment priorities remain investing in the business, strategic acquisitions, share repurchases over time, and a growing dividend, noting the dividend was increased 9% this year.

On OneOncology ownership and accounting, Cleary said Cencora increased its ownership stake from 35% to 92%, with practices and management owning the remaining 8%. He also flagged two OneOncology-related “below the operating income line” benefits tied to OneOncology’s UUG subsidiary: approximately $30 million of income expected in other income and loss for fiscal 2026 related to a joint venture, and a non-controlling loss addback that will largely offset non-controlling income eliminated from ProFarma, leaving the non-controlling interest line “relatively small” in fiscal 2026.

In Q&A, management also addressed manufacturer list price reductions tied to policy changes, saying Cencora was prepared and had been “very successful” in discussions with manufacturers in maintaining economics and gross profit dollars, citing the value it provides in the supply chain.

Management closed the call reiterating confidence in its strategy and long-term value creation, pointing to raised guidance and continued execution across the business.

About Cencora NYSE: COR

Cencora NYSE: COR is a global healthcare services and pharmaceutical distribution company that provides end-to-end solutions across the pharmaceutical supply chain. The company's core activities include wholesale drug distribution, specialty drug distribution, and the operation of specialty pharmacies, complemented by logistics, cold-chain management and other fulfillment services designed to support complex and temperature-sensitive therapies.

Beyond physical distribution, Cencora offers a range of commercial and patient-focused services for pharmaceutical manufacturers and healthcare providers.

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