Cencora NYSE: COR reported higher fiscal second-quarter adjusted earnings and operating income, while management raised its full-year adjusted EPS outlook and said it would resume opportunistic share repurchases. The pharmaceutical distribution and healthcare services company also lowered its full-year revenue growth expectations, citing faster-than-anticipated brand conversions at a large mail-order pharmacy customer and slower expected growth in GLP-1 products.
President and Chief Executive Officer Bob Mauch said Cencora delivered operating income growth in both its U.S. and International Healthcare Solutions segments and adjusted diluted EPS growth of 7.5% in the quarter. He said the results reflected the resilience of the business and supported management’s confidence in fiscal 2026 guidance.
“The critical role we play in the pharmaceutical supply chain and the investments we are making allow us to capitalize on growth opportunities,” Mauch said.
Adjusted EPS rises as revenue grows 4%
Executive Vice President and Chief Financial Officer Jim Cleary said Cencora generated adjusted diluted EPS of $4.75, up 7.5% from the prior-year quarter. Consolidated revenue rose 4% to $78.4 billion, driven by growth in both reportable segments and in the company’s “other” category.
Adjusted consolidated gross profit increased 16% to $3.4 billion, while gross profit margin expanded 45 basis points to 4.31%. Cleary said the margin increase was largely driven by the February 2026 acquisition of OneOncology. Adjusted consolidated operating expenses rose 22.5%, also reflecting the OneOncology acquisition. Excluding both management services organizations, or MSOs, operating expenses grew 5% on a constant-currency basis.
Adjusted consolidated operating income increased 6% to $1.3 billion. Net interest expense rose $36 million year over year to $140 million, primarily because of debt raised in February to finance the OneOncology acquisition. The effective tax rate was 18.9%, down from 20.8% a year earlier, reflecting discrete tax benefits in the current quarter. Diluted share count was 195.4 million, up 0.1%.
Cencora ended March with $2.2 billion in cash after generating $1.1 billion of free cash flow during the quarter. The company maintained its full-year adjusted free cash flow guidance of approximately $3 billion.
U.S. segment growth tempered by customer losses, weather and COVID vaccine comparison
U.S. Healthcare Solutions revenue rose 3% to $68.8 billion. Cleary said the business saw continued volume growth, including specialty sales to health systems and physician practices, along with $1.9 billion of year-over-year growth from GLP-1 sales.
However, Cencora said revenue growth was reduced by several factors. Manufacturer list price reductions represented a $2 billion revenue headwind in the quarter. The company also continued to see the impact of the previously disclosed fiscal 2025 loss of an oncology customer and a grocery customer. In addition, faster brand conversions at a large mail-order pharmacy customer weighed on revenue more than expected. Cleary said those sales are low margin, concentrating the effect on revenue rather than operating income.
U.S. Healthcare Solutions operating income increased 6% to $998 million. Cleary said the prior loss of an oncology customer remained a headwind and was larger than the contribution from the OneOncology acquisition during the quarter. He also said inclement weather across the U.S. led to missed patient appointments and lower physician office volumes in late January and early February, creating an estimated $10 million operating income headwind. Patient appointments and specialty product volumes rebounded in March, he said.
The segment also faced a $10 million operating income headwind from COVID-19 vaccines compared with a $15 million contribution in the prior-year quarter. Cleary said that, excluding the OneOncology acquisition and the 2025 oncology customer loss, U.S. Healthcare Solutions growth would have been approximately 7%, in line with the company’s long-term guidance despite the weather and COVID-related factors.
International segment benefits from European distribution and specialty logistics rebound
International Healthcare Solutions revenue increased 13% as reported to $7.6 billion and rose 7% on a constant-currency basis. Cleary said the growth was primarily driven by the European distribution business.
International operating income was $176 million, up about 14% as reported and 13% on a constant-currency basis. The segment benefited from the timing shift of manufacturer price adjustments in a developing market country, as well as a continued rebound in global specialty logistics. Cleary said that business delivered its second consecutive quarter of operating income growth.
Mauch said Cencora is winning new specialty logistics contracts in areas including cell and gene therapies and laboratory logistics, while also executing productivity initiatives. He said manufacturers are increasingly developing products for smaller patient populations, and Cencora’s global reach and ability to support complex specialty products position it as a trusted partner.
In the “other” category, revenue rose 5% to $2.1 billion, largely due to growth at Profarma and MWI Animal Health. That was partly offset by an expected revenue decline in legacy U.S. hub consulting services, which Cencora divested on April 30. Operating income in the category declined 1% to $92 million.
Guidance updated: EPS raised, revenue outlook reduced
Cencora raised its full-year adjusted diluted EPS guidance to a range of $17.65 to $17.90, compared with its prior outlook of $17.45 to $17.75. The company now expects consolidated operating income growth of 12% to 14%, up from 11.5% to 13.5% previously.
At the same time, management reduced consolidated revenue growth guidance to 4% to 6%, down from the prior range of 7% to 9%. Cencora also lowered its U.S. Healthcare Solutions revenue growth outlook to 4% to 6%. Cleary said the updated revenue forecast reflects faster-than-expected brand conversions at the large mail-order customer and slower anticipated GLP-1 growth than the company had expected.
International revenue growth guidance was increased to 8% to 10% as reported, reflecting foreign exchange changes, while constant-currency growth expectations remained unchanged at 6% to 8%. U.S. operating income growth guidance remained unchanged at 14% to 16%, and International operating income growth guidance remained at 5% to 8%.
Cencora now expects interest expense of approximately $485 million, reflecting debt paydown progress and better-than-expected rates on senior notes priced in February. The company also expects full-year diluted shares outstanding to be under 195.5 million as it resumes opportunistic share repurchases, with plans to buy back $1 billion of shares by calendar year-end.
Management addresses biosimilars, MSOs and capital deployment
During the question-and-answer portion of the call, analysts focused on the impact of price reductions, brand-to-biosimilar conversions and the company’s long-term operating profit outlook. Mauch said Cencora remains confident in its ability to maintain dollar profit through manufacturer discussions around lower prices, citing the scale, efficiency and value of its distribution services.
On biosimilars, Mauch distinguished between Part D mail-order dynamics and Part B physician-administered products. In Part D, he said a move from brand to biosimilar may reduce wholesaler revenue but is not expected to be a meaningful profit hit. In Part B, where Cencora has a presence through distribution, group purchasing and MSOs, Mauch said conversions to biosimilars can be incrementally beneficial to practices and to Cencora.
Mauch also said the company is encouraged by early progress in combining capabilities across OneOncology and RCA, including shared work in research and clinical trials, back-office services and physician recruitment and retention. Cleary said OneOncology and RCA have been significant contributors to Cencora’s specialty growth for several years.
Cleary, who is set to retire as CFO in June and from the company in December, said Cencora will continue a balanced approach to capital deployment, including capital expenditures, strategic mergers and acquisitions, opportunistic share repurchases and dividend growth. He said the company had paid down $500 million of term loans so far in the fiscal year and planned to pay down $1.3 billion for the year.
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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