Cencora, Inc. COR is well-poised for growth on the back of robust U.S. Healthcare Solutions business and product launches. However, intense competition is a concern.

Shares of this Zacks Rank #2 (Buy) company have risen 21.9% so far this year against the industry’s 5.5% decline. The S&P 500 Index has decreased 15.6% in the same time frame.

Cencora is one of the world’s largest pharmaceutical service companies. It is focused on providing drug distribution and related services to reduce healthcare costs and improve patient outcomes. The company has a market capitalization of $53.27 billion.

COR’s bottom line is anticipated to improve 12.1% over the next five years. Its earnings beat estimates in each of the trailing four quarters, delivering an average surprise of 4.94%.

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What’s Driving COR’s Growth?

Strong performance in its U.S. Healthcare Solutions segment, particularly in specialty products and GLP-1 medications, is likely to continue to drive growth in 2025. COR and its peers are expanding into the high-margin sector as demand for medicines treating complex conditions, such as rheumatoid arthritis and cancer, continues to grow. The company reported robust first-quarter fiscal 2025 results, with earnings per share (EPS) of $3.73 (up 13.7% year over year) and revenues of $81.49 billion (up 12.8%).

Internationally, revenues rose 5.5% despite currency challenges, supported by the European and Canadian markets. However, the International segment’s operating income declined due to lower operating income at COR’s global specialty logistics business, partially offset by an increase in its European distribution business.

For fiscal 2025, adjusted EPS is estimated to be in the range of $15.25-$15.55 (up from the previous projection of $15.15-$15.45), indicating growth of 11-13% from the prior-year level. The top line is projected to rise 8-10% (previously 7-9%). Revenues from the U.S. Healthcare Solutions segment and the International Healthcare solutions business are estimated to increase 9-11% and 4-5%, respectively. Adjusted operating income is anticipated to improve 11.5-13.5%from the earlier guidance of 5-6.5%.

Cencora also acquired Retina Consultants of America earlier this year, expanding its specialty capabilities beyond oncology. This acquisition complements COR’s pharmaceutical-centric strategy, strengthens its Management Services Organization portfolio and positions it well in the growing retina and ophthalmology market.

Meanwhile, Cencora’s focus on specialty pharmaceuticals remains a significant growth driver. Increasing demand for GLP-1 products and specialty distribution to physicians and health systems support strong revenue momentum. Investments in distribution infrastructure and technology improve logistics support and temperature-sensitive product handling and enhance compliance with regulatory standards.

Investments in automation and continuity within COR’s European and Canadian businesses ensure resilience and scalability in international markets. Renewed collaborations with Express Scripts and Walgreens strengthen core distribution capabilities and align resources to meet customer needs effectively.

What’s Hurting COR Stock?

Cencora operates in a highly competitive pharmaceutical distribution and related healthcare services market. The generic industry is facing consolidation of customers and manufacturers, global competitors and regulatory challenges.

Higher sales of low-margin GLP-1 products and declining COVID-related revenues compress profit margins. Changes in U.S. healthcare policy, particularly Medicare Part B and D reimbursement reforms, could adversely impact profitability. A goodwill impairment on PharmaLex reflects underperformance in outsourced pharma services due to market pressures.

Increasing competition in specialty and biosimilar markets may challenge market share and pricing strategies.

Cencora, Inc. Price

Cencora, Inc. price | Cencora, Inc. Quote

Estimate Trend

COR has been witnessing a positive estimate revision trend for fiscal 2025. In the past 60 days, the Zacks Consensus Estimate for earnings has increased from $15.28 to $15.36 per share.

The consensus mark for second-quarter fiscal 2025 revenues is pegged at $74.64 billion, indicating a 9.1% improvement from the year-ago reported actuals. The bottom-line estimate is pinned at $4.07, implying year-over-year growth of 7.1%.

Other Stocks to Consider

Some better-ranked stocks in the broader medical space are Masimo MASI, Abbott Laboratories ABT and Align Technology ALGN. At present, Masimo sports a Zacks Rank #1 (Strong Buy), whereas Boston Scientific and Align Technology carry a Zacks Rank #2 (Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.

Masimo’s shares have declined 12.2% so far this year. Estimates for MASI’s 2024 earnings per share (EPS) have increased 1.2% to $4.10 in the past 30 days. MASI’s earnings beat estimates in each of the trailing four quarters, the average surprise being 17.1%. In the last reported quarter, it posted an earnings surprise of 16.6%.

Estimates for Abbott Laboratories' 2025 EPS have remained stable at $5.15 in the past 30 days. Shares of the company have gained 9.6% so far this year against the industry’s decline of 2%. ABT’s earnings surpassed estimates in three of the trailing four quarters and met the same once, the average surprise being 1.64%. In the last reported quarter, it delivered an earnings surprise of 0.00%.

Estimates for Align Technology’s fiscal 2025 EPS have remained stable at $9.99 in the past 30 days. Shares of the company have lost 30.8% so far this year compared with the industry’s 5.2% decline. ALGN’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 3.53%. In the last reported quarter, it delivered an earnings surprise of 0.41%.

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This article originally published on Zacks Investment Research (zacks.com).

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