Cencora to Report Q3 Earnings: Is a Beat in Store?

Cencora COR is scheduled to release third-quarter fiscal 2024 results on Jul 31, before the opening bell.

In the last reported quarter, the company delivered an earnings surprise of 4.11%. Its earnings beat estimates in each of the trailing four quarters, delivering an average surprise of 6.12%.

Q3 Estimates

The Zacks Consensus Estimate for revenues is pegged at $73.58 billion, indicating an improvement of 9.9% from the top line reported in the prior-year quarter. The consensus mark for earnings is pinned at $3.18 per share, implying growth of 8.9% from the year-ago quarter's recorded number.

Factors to Note

Sustained strong growth in specialty product sales, coupled with broad-based solid performance and utilization trends across the portfolio in the U.S. Healthcare Solutions segment, might have favored COR's fiscal third-quarter performance. High demand for the recently-approved GLP-1 drugs for diabetes and/or weight loss is likely to have boosted growth. Moreover, the new distribution center in California should have continued to support its scale of supply.

The commercial COVID-19 treatments recorded lower sales in the past two quarters. This trend is likely to have continued in the soon-to-be-reported quarter. The company raised its fiscal 2024 revenue growth guidance for the U.S. Healthcare Solutions segment from 7-10% to 11-13%. This may be reflected in the fiscal third-quarter results as well. Our model expects revenues for this segment to be $66.13 billion.

Operating income at the aforementioned segment is anticipated to grow 10-12% in fiscal 2024. This is likely to be reflected in the fiscal third-quarter results. Our model predicts the segment's adjusted operating income to be $665.9 million.

Apart from this, the International Healthcare Solutions segment is expected to have exhibited solid performance on the back of increased sales in its European distribution and Canadian businesses. Moreover, the addition of products with the PharmaLex acquisition last year is likely to have generated additional revenues.

Per fiscal 2024, revenues and operating income at the International Healthcare Solutions segment are estimated to grow 4-7% and 5-8%, respectively. This is likely to be reflected in the upcoming quarterly results. Our model expects the segment's adjusted operating income and revenues to be $189.4 million and $7.35 billion, respectively.

Although revenues and operating income are likely to have been on the higher side, gross margin growth is anticipated to have been weak. This is due to higher volumes of low-margin GLP-1 products, coupled with lower volumes of high-margin government-owned COVID treatments.

Earnings Beat Likely

Our proven model predicts an earnings beat for Cencora this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat.

Earnings ESP: Cencora has an Earnings ESP of +1.01%.

Zacks Rank: The company currently carries a Zacks Rank #3.

Other Stocks Worth a Look

Here are some other medical stocks worth considering as these have the right combination of elements to post an earnings beat this reporting cycle.

Phibro Animal Health PAHC has an Earnings ESP of +0.99% and a Zacks Rank of 2 at present.

The company's shares have surged 63% year to date. PAHC's earnings met estimates in the last reported quarter. Phibro Animal Health has a trailing four-quarter average negative earnings surprise of 2.30%.

IQVIA IQV has an Earnings ESP of +0.13% and a Zacks Rank of 2 at present.

Its shares have risen 3.6% year to date. IQV's earnings beat estimates in the last reported quarter. IQVIA has a trailing four-quarter average earnings surprise of 1.77%.

AxoGen AXGN has an Earnings ESP of +25.00% and a Zacks Rank of 3 at present.

The stock has risen 35.3% year to date. AXGN's earnings beat estimates in the last reported quarter. AxoGen has a trailing four-quarter average earnings surprise of 66.46%.

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