Cencora (COR)

Healthcare distributor Cencora (NYSE:COR) reported revenue ahead of Wall Streets expectations in Q3 CY2025, with sales up 5.9% year on year to $83.73 billion. Its non-GAAP profit of $3.84 per share was 1.4% above analysts’ consensus estimates.

Company Overview

Formerly known as AmerisourceBergen until its 2023 rebranding, Cencora (NYSE:COR) is a global pharmaceutical distribution company that connects manufacturers with healthcare providers while offering logistics, data analytics, and consulting services.

Upfront premiums collected by health insurers lead to reliable revenue, but profitability ultimately depends on accurate risk assessments and the ability to control medical costs. Health insurers are also highly sensitive to regulatory changes and economic conditions such as unemployment. Going forward, the industry faces tailwinds from an aging population, increasing demand for personalized healthcare services, and advancements in data analytics to improve cost management. However, continued regulatory scrutiny on pricing practices, the potential for government-led reforms such as expanded public healthcare options, and inflation in medical costs could add volatility to margins. One big debate among investors is the long-term impact of AI and whether it will help underwriting, fraud detection, and claims processing or whether it may wade into ethical grey areas like reinforcing biases and widening disparities in medical care.

Cencora's primary competitors in pharmaceutical distribution include McKesson Corporation (NYSE:MCK) and Cardinal Health (NYSE:CAH), which together with Cencora form the "Big Three" distributors that dominate the U.S. market. In specialty logistics, the company competes with UPS Healthcare (NYSE:UPS) and FedEx (NYSE:FDX).

Larger companies benefit from economies of scale, where fixed costs like infrastructure, technology, and administration are spread over a higher volume of goods or services, reducing the cost per unit. Scale can also lead to bargaining power with suppliers, greater brand recognition, and more investment firepower. A virtuous cycle can ensue if a scaled company plays its cards right.

With $321.3 billion in revenue over the past 12 months, Cencora is one of the most scaled enterprises in healthcare. This is particularly important because health insurance providers companies are volume-driven businesses due to their low margins.

A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Luckily, Cencora’s sales grew at a decent 11.1% compounded annual growth rate over the last five years. Its growth was slightly above the average healthcare company and shows its offerings resonate with customers.

We at StockStory place the most emphasis on long-term growth, but within healthcare, a half-decade historical view may miss recent innovations or disruptive industry trends. Cencora’s annualized revenue growth of 10.7% over the last two years aligns with its five-year trend, suggesting its demand was stable.

We can dig further into the company’s revenue dynamics by analyzing its most important segment, US Healthcare. Over the last two years, Cencora’s US Healthcare revenue averaged 11.4% year-on-year growth.

This quarter, Cencora reported year-on-year revenue growth of 5.9%, and its $83.73 billion of revenue exceeded Wall Street’s estimates by 0.5%.

Looking ahead, sell-side analysts expect revenue to grow 6.7% over the next 12 months, a deceleration versus the last two years. We still think its growth trajectory is satisfactory given its scale and suggests the market is baking in success for its products and services.

Operating margin is one of the best measures of profitability because it tells us how much money a company takes home after subtracting all core expenses, like marketing and R&D.

Cencora’s operating margin might fluctuated slightly over the last 12 months but has generally stayed the same. The company broke even over the last five years, lousy for a healthcare business. Its large expense base and inefficient cost structure were the main culprits behind this performance.

Analyzing the trend in its profitability, Cencora’s operating margin might fluctuated slightly but has generally stayed the same over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

In Q3, Cencora’s breakeven margin was in line with the same quarter last year. This indicates the company’s overall cost structure has been relatively stable.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Cencora’s EPS grew at an astounding 15.1% compounded annual growth rate over the last five years, higher than its 11.1% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

We can take a deeper look into Cencora’s earnings quality to better understand the drivers of its performance. A five-year view shows that Cencora has repurchased its stock, shrinking its share count by 5%. This tells us its EPS outperformed its revenue not because of increased operational efficiency but financial engineering, as buybacks boost per share earnings.

In Q3, Cencora reported adjusted EPS of $3.84, up from $3.34 in the same quarter last year. This print beat analysts’ estimates by 1.4%. Over the next 12 months, Wall Street expects Cencora’s full-year EPS of $15.99 to grow 9.3%.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

Cencora has shown mediocre cash profitability over the last five years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 1%, subpar for a healthcare business.

Cencora’s free cash flow clocked in at $2.88 billion in Q3, equivalent to a 3.4% margin. This result was good as its margin was 2.4 percentage points higher than in the same quarter last year. Its cash profitability was also above its five-year level, and we hope the company can build on this trend.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Cencora’s five-year average ROIC was 55.2%, placing it among the best healthcare companies. This illustrates its management team’s ability to invest in highly profitable ventures and produce tangible results for shareholders.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Unfortunately, Cencora’s ROIC has decreased significantly over the last few years. Only time will tell if its new bets can bear fruit and potentially reverse the trend.

Cencora reported $4.36 billion of cash and $7.66 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $3.84 billion of EBITDA over the last 12 months, we view Cencora’s 0.9× net-debt-to-EBITDA ratio as safe. We also see its $135.9 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

It was good to see Cencora narrowly top analysts’ full-year EPS guidance expectations this quarter. We were also happy its revenue narrowly outperformed Wall Street’s estimates. Overall, this print had some key positives. The market seemed to be hoping for more, and the stock traded down 1.9% to $338 immediately following the results.

Updated: December 4, 2025 at 10:54 PM EST

The latest quarterly earnings matters, sure, but we actually think longer-term fundamentals and valuation matter more. Investors should consider all these pieces before deciding whether or not to invest in Cencora.

There is a lot to like about Cencora. For starters, its revenue growth was good over the last five years. And while its diminishing returns show management's recent bets still have yet to bear fruit, its scale gives it meaningful leverage when negotiating reimbursement rates. On top of that, Cencora’s astounding EPS growth over the last five years shows its profits are trickling down to shareholders.

Cencora’s P/E ratio based on the next 12 months is 19x. Analyzing the healthcare landscape today, Cencora’s positive attributes shine bright. We like the stock at this price.

Wall Street analysts have a consensus one-year price target of $384.79 on the company (compared to the current share price of $330.63), implying they see 16.4% upside in buying Cencora in the short term.