8-K: Cencora Raises Fiscal Year 2024 EPS Guidance, Expects Slower Growth in 2025

Cencora has increased its adjusted diluted EPS guidance for fiscal year 2024 but anticipates growth to be at the lower end of its long-term targets for fiscal year 2025 due to COVID-related headwinds and a potential customer loss.

Summary

• Cencora has updated its adjusted diluted EPS guidance for fiscal year 2024 to a range of $13.60 to $13.70, an increase from the previous range of $13.55 to $13.65.
• The company expects adjusted operating income and adjusted diluted EPS growth for fiscal year 2025 to be at the bottom end of its long-term target ranges of 5% to 8% and 8% to 12%, respectively.
• This slower growth is primarily attributed to headwinds from COVID products, including commercial COVID vaccines and the loss of exclusive COVID therapy contribution from the first quarter of fiscal year 2024.
• Additionally, Cencora is factoring in the potential loss of an oncology customer in June 2025 due to a pending acquisition.
• Cencora has extended its pharmaceutical supply agreement with Evernorth Health Services for an additional three years, through September 2029.

Sentiment

Score: 6

Explanation: The document presents a mixed outlook. While the company has raised its 2024 EPS guidance, the slower growth expected in 2025 and potential customer loss temper the positive news. The sentiment is cautiously optimistic.

Positives

• Cencora has increased its adjusted diluted EPS guidance for fiscal year 2024, indicating strong current performance.
• The company has secured a three-year extension of its pharmaceutical supply agreement with Evernorth Health Services, providing revenue stability through September 2029.

Negatives

• Cencora expects slower growth in fiscal year 2025, with both adjusted operating income and adjusted diluted EPS growth projected to be at the lower end of their respective long-term target ranges.
• The company anticipates headwinds from reduced COVID product sales, including vaccines and exclusive therapies.
• A potential loss of an oncology customer in June 2025 due to a pending acquisition is expected to negatively impact results.

Risks

• The company faces headwinds from declining COVID product sales, which will impact revenue and profitability.
• The potential loss of a significant oncology customer in June 2025 could further reduce revenue.
• The company's forward-looking statements are subject to uncertainty and changes in circumstances, and actual results could vary materially from those indicated.

Future Outlook

Cencora anticipates slower growth in fiscal year 2025 due to COVID-related headwinds and a potential customer loss, with growth expected to be at the lower end of its long-term targets.

Management Comments

• Executives of Cencora will be presenting at several healthcare conferences to provide updates on performance expectations and recent business developments.
• The updated guidance reflects the company's continued strong results.

Industry Context

This announcement reflects the ongoing impact of the COVID-19 pandemic on the healthcare industry, particularly the decline in demand for related products. The extension of the supply agreement with Evernorth is a positive sign of continued business relationships in the sector.

Comparison to Industry Standards

• Cencora's revised EPS guidance for 2024 indicates a positive short-term performance, potentially outperforming some peers who may be facing more significant COVID-related headwinds.
• However, the projected slower growth in 2025, particularly at the lower end of long-term targets, suggests that Cencora may be facing challenges similar to other companies in the pharmaceutical distribution sector, such as McKesson and Cardinal Health, who are also navigating post-pandemic market adjustments.
• The loss of a major oncology customer is a specific risk that could put Cencora at a disadvantage compared to competitors with more diversified customer bases.

Stakeholder Impact

• Shareholders may react positively to the increased 2024 EPS guidance but may be concerned about the slower growth outlook for 2025.
• Employees may be affected by the potential customer loss and the need to adapt to changing market conditions.
• Customers may be impacted by the potential loss of the oncology customer, which could affect supply chains and service levels.
• Suppliers may need to adjust their production and delivery schedules based on Cencora's updated guidance and potential customer loss.

Next Steps

• Cencora executives will present at the Morgan Stanley Healthcare Conference, Wells Fargo Healthcare Conference, and Baird Healthcare Conference.
• The company will continue to monitor the impact of COVID-19 and the potential loss of the oncology customer on its financial performance.

Key Dates

Keywords

Cencora, EPS, Earnings, Guidance, Pharmaceutical Supply, Healthcare, COVID-19, Evernorth, Oncology, Operating Income