Cencora Q3 2026 Earnings Call Transcript

Cencora (NYSE: COR ) held its third-quarter earnings conference call on Wednesday. Below is the complete transcript from the call. This transcript is brought to you APIs. For real-time access to our entire catalog, please visit for a consultation.

Access the full call at Summary Full Transcript OPERATOR Hello everyone. Thank you for joining us, and welcome to the Cencora Inc. Q3 fiscal year 2026 earnings call. After today's prepared remarks, we will host a question-and-answer session.

If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. I will now hand the conference over to Bennett Murphy. Bennett, please go ahead.

Bennett Murphy, Senior Vice President, Investor Relations and Enterprise Productivity Good morning, good afternoon. Thank you all for joining us for this conference call to discuss Cencora's fiscal 2026 third quarter results. I am Bennett Murphy, Senior Vice President, Investor Relations and Enterprise Productivity. Joining me today are Bob Mauch, President and CEO, and Eva Barrato, Executive Vice President and CFO.

On today's call we will be discussing non-GAAP financial measures. com. We've also posted a slide presentation to accompany today's press release on our investor website. During this conference call we will discuss forward-looking statements about our business and financial expectations on an adjusted non-GAAP basis including, but not limited to, EPS, operating income and income taxes.

Forward-looking statements are based on management's current expectations and are subject to uncertainty and changes. For a discussion of key risks and assumptions, we refer you to today's press release and our SEC filings, including our most recent 10-Q. Cencora assumes no obligation to update any forward-looking statements and this call cannot be rebroadcast without the permission of the company. You have the opportunity to ask questions after today's remarks by management.

We ask that you limit your questions to one per participant in order for us to get to as many as possible within the hour. With that, I will turn the call over to Bob. Robert Mauch, President and Chief Executive Officer Thank you, Bennett. Hi everyone, and thank you for joining Cencora's fiscal 2026 third quarter earnings call.

To start, I'd like to thank our Cencora team members for their continued commitment to providing valuable solutions for our customers. In our third quarter we delivered strong results driven by execution across Cencora and investments to advance our specialty positioning and our pharmaceutical-centric strategy. Our business performance drove double-digit adjusted operating income growth and, supported by $1 billion of opportunistic share repurchases, we achieved 12% EPS growth in the quarter. We're pleased to be raising our fiscal 2026 EPS guidance, reflecting our confidence in our continued execution and the strength of our portfolio as we close out the fiscal year.

I'm very happy Eva Barrato has joined us as Chief Financial Officer. She will provide details on our performance and continued confidence in our short- and long-term expectations. During my remarks today, I'll highlight how our strategy enables us to deliver on our growth priorities. First, our differentiated specialty pharmaceutical platform uniquely positions us to support innovation and patient care across our footprint.

Second, through our digital transformation, we are modernizing how we operate and serve our partners. And finally, our focus on talent and culture is equipping our teams with the skills, resources and leadership needed to continue advancing our pharmaceutical-centric strategy and delivering our purpose. I'll start with Specialty, where our platform supports growth across the healthcare ecosystem. Our specialty platform builds on our strong foundation in pharmaceutical distribution and deep relationships with providers and manufacturers.

Over time, we've expanded our capabilities into a broad set of services designed to address the needs of specialty care. Over nearly three decades, Cencora has worked alongside community providers to advance our distribution, GPO and practice solutions, helping physicians operate effectively and care for patients close to home. As specialty care has become more complex, these providers are seeking partners who can help them navigate access, reimbursement and administrative demands while preserving their ability to deliver care in community-based settings.

Our management services organizations are well positioned to help oncology and retina practices manage the growing complexity of specialty care and broaden access to clinical trials and research while allowing physicians to remain focused on patient care. Importantly, our role across the specialty landscape gives us a clear view of what it takes for new therapies to reach patients. That unique perspective informs the work we do with manufacturers, who increasingly need partners with the infrastructure, expertise and connectivity to enable successful launches and protect product integrity across Cencora.

Our specialty logistics, 3PL and commercialization services help bring innovation to market and drive reliable access to therapies. Before moving to the next topic, I want to reiterate our confidence in the value Cencora provides and our ability to help all stakeholders navigate the impact of market dynamics. As we've demonstrated, as the market continues to digest and annualize list price changes, the value proposition of the services we provide remains clear. We're well positioned through our distribution footprint, sourcing scale and end-to-end channel relationships.

Importantly, Part B biosimilars will continue to be an opportunity for Cencora to drive value for all stakeholders while taking cost out of the healthcare system and improving patient access. Moving to our digital transformation, where we're combining business process improvement and technology advances to improve how we operate and work with partners across the healthcare system. A tangible example of this is our work in demand forecasting. Our teams are using AI to better anticipate product needs across our network and identify key factors driving changes in demand.

In a business like ours, these tools help improve planning, enhance product availability, and maintain reliable service for providers, pharmacies and health systems. Across our organization, we're applying the same disciplined approach to simplify routine activities and give our team members better insights. That allows team members to spend less time on manual processes and more time using their expertise to work with partners and solve problems. Next, through our focus on talent and culture, we're equipping our teams to continue advancing our pharmaceutical-centric strategy and delivering on our purpose across Cencora.

Our teams bring the expertise and commitment needed to serve providers, manufacturers and patients in an evolving healthcare environment. We're focused on ensuring our talent has clear career paths while strengthening our ability to execute for customers and partners. That focus extends to key roles across the organization. This quarter, in addition to Eva, we welcomed Sam Hammack as Chief Human Resources Officer.

Since joining the company, both Eva and Sam have brought valuable expertise and proven to be excellent enterprise leadership team members. I also want to recognize the significant contributions of Jim Cleary and Silvana Battaglia, who recently retired as CFO and CHRO. Both will continue as advisors through the end of the calendar year. With that, I'll turn the call over to Eva for a discussion of our financial results and updated fiscal 2026 guidance.

We're glad to have her here with us today for her first earnings call as CFO. Eva Boratto, Executive Vice President and Chief Financial Officer Thanks, Bob, and good morning, everyone. It's a pleasure to join the call today, and I look forward to engaging with the investor community in the coming weeks and months. Since joining Cencora in June, I've spent time with leaders across the enterprise and deepened my understanding of the strength of our businesses, the durability of our pharmaceutical-centric strategy, and the financial discipline that underpins our long-term growth algorithm.

Today, I'll provide an overview of our consolidated fiscal 2026 third quarter results and segment-level results before turning to our updated guidance. Unless otherwise stated, my remarks will focus on our adjusted non-GAAP financial results. For further discussions of our GAAP results, please refer to our earnings press release and presentation. Our third quarter performance reflects the strength of our pharmaceutical-centric strategy, the breadth of our specialty platform, and our disciplined capital deployment.

S. Healthcare Solutions segment, including the performance of our OneOncology acquisition and continued growth in our International segment, while share repurchases also contributed to the 12% adjusted earnings per share growth. 95. Turning now to consolidated revenue.

8 billion, up 5%, driven by growth in both reportable segments and in Other, which I will describe in more detail when discussing segment-level results. S. Healthcare Solutions segment in the quarter. 16%, largely due to our acquisition of OneOncology in February.

3 billion, an increase of 27%, which again reflects the impact of the February 2026 acquisition of OneOncology. Excluding both MSOs, operating expenses grew 5% on a constant currency basis. 2 billion, an increase of 17% compared to the prior year, driven by double-digit growth across both reportable segments and Other. Moving now to our net interest expense and effective tax rate for the third quarter.

Net interest expense was $141 million, an increase of $59 million compared to the prior year quarter, primarily due to the debt raised in February to finance the OneOncology acquisition. We have made significant progress on our debt repayment commitments and have fully paid off our RCA financing-related term loan balance of $800 million, $400 million repaid in the June quarter and an additional $400 million repaid in July. 7% in the prior year quarter. 7% decrease compared to the prior year quarter as a result of $1 billion of share repurchases in the quarter at an average price of $268 per share.

1 billion. Our full-year adjusted free cash flow guidance of approximately $3 billion remains unchanged. S. Healthcare Solutions segment.

S. 9 billion, an increase of 5% in the quarter. Our revenue growth was supported by strength in specialty across both health systems and physician practices. 3 billion year over year.

The growth was offset by three items. 4 billion headwind to revenue growth. Second, the 2025 loss of an oncology customer, and lastly, lower sales to our large mail order customer, as expected and consistent with second quarter. S.

Healthcare Solutions segment operating income increased 16% to $966 million in the quarter. We saw strong growth in specialty across our MSOs, health systems, and community provider businesses. We were particularly pleased with the performance of our MSO platform with both OneOncology and RCA performing ahead of our expectations. Our core business continued to demonstrate its strength and value, delivering double-digit organic operating income growth when excluding the OneOncology contribution and the loss of the oncology customer last July.

I'll now turn to our International Healthcare Solutions segment. 7 billion, up 6% on both an as reported and constant currency basis, driven by growth in our European distribution and specialty logistics businesses, World Courier and European 3PL, in the quarter. International Healthcare Solutions operating income was $166 million, up 21% on an as reported basis and up 23% on a constant currency basis in the quarter.

Our European distribution business continued to benefit from the shift in timing of manufacturer price adjustments in a developing market country again in the third quarter, and there was strength across our global specialty logistics and European 3PL businesses that delivered double-digit operating income growth. Moving to Other, which reflects the businesses for which we are pursuing strategic alternatives. 3 billion, up 7%, largely due to growth at Profarma and MWI Animal Health. Operating income was $109 million, up 25% due to operating income growth at MWI Animal Health, which also benefited from being accounted for as held for sale.

That completes the review of our segment-level results. I'll now discuss our updated fiscal 2026 guidance. 90. S.

Healthcare Solutions revenue. S. revenue, we would expect revenue to be in the lower half of our 4% to 6% growth range. Given current expectations in the International Healthcare Solutions segment, we now expect revenue growth to be approximately 8% at the low end of our previous range as a result of the stronger dollar in the second half of the year.

On a constant currency basis, we expect International Healthcare Solutions segment revenue growth to be approximately 7%. In Other, we anticipate revenue growth of approximately 6%. Moving to operating income, we are raising the bottom end of our guidance for consolidated operating income growth and now expect growth to be in the range of 13% to 14%. S.

5%. S. Healthcare Solutions segment as we have now fully lapped the loss of the oncology customer, continue to benefit from the OneOncology acquisition, and have an easier expense comparison in the fourth quarter. In the International Healthcare Solutions segment, we now expect both as reported and constant currency operating income growth to be approximately 9%.

In Other, we now expect operating income growth to be approximately 10%, reflecting MWI's strong execution and performance. Moving now to our below-the-line items, we now expect net interest expense to be approximately $490 million, up from our previous expectations of approximately $485 million, primarily reflecting lower interest income following the $1 billion in share repurchases we completed in the quarter. As a result of these repurchases, we are also updating our expectations for full-year diluted shares outstanding to be approximately 194 million shares.

Looking ahead to fiscal 2027, we are currently in the midst of our fiscal 2027 planning process and will provide full fiscal year 2027 guidance on our November earnings call. That said, I wanted to offer some perspectives as you think about your models. First, as we announced in February, we have reached an agreement to merge MWI Animal Health with Covetris. We are continuing to work through the regulatory process and have no update on timing.

However, for modeling purposes, if the transaction were to close at the midpoint of our fiscal year, we would have a $150 million operating income headwind within Other. 35. Second, we do not have an update on the expected timing of the ISOUTH retina carve out acquisition. As a result, we would not suggest incorporating that into the models at this time.

S. and International Healthcare Solutions segments, giving us confidence in our long-term guidance. Although I've only been the CFO for a month, I've been impressed by the strength of our talent, the clarity of our strategy, and the dedication to our purpose. As I look to fiscal 2027 and beyond, I'm excited to further Cencora's strong track record of execution and disciplined capital stewardship to drive durable shareholder value creation.

Now I'll turn the call back to Bob for some closing remarks before we move to Q&A. Robert Mauch, President and Chief Executive Officer Thank you, Eva.