Cencora, Inc. COR blazes a trail, hitting a soaring 52-week pinnacle of $240.86 on Mar 18, 2024, then easing down slightly to $239.31 by the closing bell.
Over the past year, this Zacks Rank #2 (Buy) gem has outpaced others, clocking in a 55.5% surge, dwarfing the industry’s measly 5.9% jaunt and racing past the S&P 500’s 30.4% uptick.
Over a five-year span, the company revved up earnings at a 13% clip, leaving the industry in the dust at 8.9%. The company’s anticipated long-term growth rate of 9.8% contrasts with the industry’s ambitious projections of 16.2%. Impressively, Cencora has beaten the Zacks Consensus Estimate in all of the past four quarters, averaging a 6.7% surprise.
Cencora’s stock is on a joyride, basking in the glow of its prowess in the U.S. Healthcare Solutions arena. Fueled by a stellar first-quarter fiscal 2024 performance and the buzz around generics and fresh product launches, the company is set for further lift-off. Yet, lurking in the shadows are fierce rivals and niggling worries about contract renewals.
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Let’s dive deeper.
Forces Driving Growth
Generics and New Product Launches: Cencora stands to reap the rewards of the generics wave, ensuring cheers from investors. Positioned to streamline product launches, the company is riding a wave of organic growth in the U.S. pharmaceutical scene, amidst better patient care access, economic upswings, and the introduction of game-changing drugs like hepatitis C treatments.
Strength in U.S. Healthcare Solutions Business: Cencora flexes its muscles, doling out a range of pharmaceuticals, from brand-name to generics. The segment also extends distribution and support to specialized physicians, especially in the oncology domain. Besides, through its animal health wing, the company markets an array of pharmaceuticals, vaccines, and more to animal markets far and wide.
In the fourth quarter of fiscal 2024, a zenith in revenue for this segment stemmed from volume growth, especially robust sales of diabetes and weight loss products in the GLP-1 segment, along with an uptick in specialty product sales to medical practices and health systems, and an increased demand for COVID-19 vaccines.
Robust Q1 Results: Cencora’s stellar show in the first quarter of fiscal 2024 fuels optimism. Blistering revenues and impressive segmental performance paint a rosy picture. The company rang in higher sales in its European and Canadian setups, propelling its International Healthcare Solutions wing. Propelled by a focused approach on the pharmaceutical front, the company is all set to make the most of emerging opportunities with its robust skills.
Challenges Ahead
Contract Renewals: Cencora’s fortunes with its top customer, Walgreens, hang in the balance. A souring of ties with a major client could deal a harsh blow to the company’s top line.
Stiff Competition: Cencora treads rocky terrain in a cutthroat pharmaceutical distribution and healthcare services landscape. The generic industry reels under consolidations, global pressures, and tightening quality standards.
Other Notable Picks
In the wide medical arena, keep an eye on other high-flyers like DaVita Inc. DVA, Cardinal Health, Inc. CAH, and Elevance Health, Inc. ELV.
DaVita, a top contender with a Zacks Rank #1 (Strong Buy), eyes a 12.1% long-term growth surge. Over the past year, its earnings have trounced estimates, with an average beat of 35.6%. A standout, indeed! Check out the complete list of today’s Zacks #1 Rank stocks here.
DaVita’s stock rose 75.7% in the last year, sprinting ahead of the industry’s 24.3% leap.
Cardinal Health, currently at a Zacks Rank of 2, eyes a long-term growth surge of 14.2%. Beating estimates in the last four quarters at an average of 15.6%, this one’s no shrinking violet.
Cardinal Health boasts a 54.9% uptick from last year, eclipsing the industry’s 15.7% rise.
Elevance Health, at a Zacks Rank of 2, anticipates a 12% long-term growth stride. In each of the last four quarters, it has surpassed estimates, averaging a 3.1% surprise.
Elevance Health’s share price rose by 9.5% in the past year, outshining the industry’s 5.9% climb.
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