Cencora Inc. (COR) has delivered another strong quarter, driven by robust performance in its U.S. Pharma segment, which saw revenue and AOI growth of 13.6% and 9.9% y/y, respectively, surpassing Citi's and consensus estimates by approximately 6%. This strength has led Citi to reiterate its "Buy" rating and raise the price target to $295 from $284, based on an 18.5x P/E on revised CY25 estimates. The U.S. segment's success is attributed to increased sales of GLP-1s and specialty provider sales, despite a contraction in gross margins due to lower-margin products and reduced COVID-19 vaccine sales.
International operations, however, faced challenges with a 2.9% decline in AOI, missing expectations due to World Courier's slow start and FX headwinds. Despite these hurdles, Cencora raised its FY25 guidance, now expecting adjusted EPS of $15.25-$15.55, reflecting 11%-13% growth. The company anticipates a more back-half weighted year, with significant contributions expected from the RCA acquisition and a recovery in World Courier.
Citi's report highlights the strategic benefits of the RCA acquisition, expected to be $0.35 accretive in the first 12 months, and notes, "We continue to be impressed by COR’s U.S. Pharma business which, in our view, is the most indexed to the lucrative provider specialty market." Cencora's focus on specialty solutions and its strong position in the ophthalmology space are seen as key growth drivers.
Cencora's stock was trading at $253.41, up 0.73% on February 5.