Summary
Cencora, Inc. (formerly AmerisourceBergen Corporation) reported a strong quarter ending December 31, 2017, with significant revenue growth and a substantial boost in net income, largely driven by the positive impact of the Tax Cuts and Jobs Act of 2017. Revenue increased by 6.0% year-over-year, primarily fueled by the Pharmaceutical Distribution Services segment. Despite increased operating expenses related to infrastructure and IT system implementations, operating income saw a modest increase. The company also made strategic moves, including the acquisition of NEVSCO and the completion of the significant H.D. Smith acquisition shortly after the quarter's end, which is expected to enhance its scale and support for independent pharmacies. The company also strengthened its international presence by increasing its ownership in Profarma and its joint venture in Brazil, with plans to consolidate their results going forward. Investors should note the substantial net income increase, which is heavily influenced by a large discrete tax benefit related to the 2017 Tax Act, lowering the effective tax rate significantly. While the core business demonstrated solid revenue growth, the company also faced operational challenges, such as the temporary suspension of production at a 503B outsourcing facility, impacting its pharmaceutical compounding operations. Management anticipates continued revenue growth and expects the lower tax rate to positively impact future effective tax rates.
Financial Highlights
55 data points| Revenue | $40.47B |
| Cost of Revenue | $39.35B |
| Gross Profit | $1.11B |
| SG&A Expenses | $558.52M |
| Operating Income | $418.97M |
| Net Income | $861.85M |
| EPS (Basic) | $3.95 |
| EPS (Diluted) | $3.90 |
| Shares Outstanding (Basic) | 218.32M |
| Shares Outstanding (Diluted) | 220.82M |
Key Highlights
- 1Revenue increased 6.0% year-over-year to $40.5 billion, primarily driven by the Pharmaceutical Distribution Services segment.
- 2Net income saw a substantial increase to $861.9 million, largely due to a $587.6 million discrete tax benefit from the Tax Cuts and Jobs Act of 2017, which reduced the effective tax rate to (140.1%).
- 3The company completed the acquisition of H.D. Smith for $815.0 million shortly after the quarter end, strengthening its position as a pharmaceutical wholesaler.
- 4Operating income increased by 4.7% to $419.0 million, reflecting an increase in gross profit offset by higher operating expenses.
- 5Distribution, selling, and administrative expenses increased by 7.3% due to operating new distribution centers and IT system implementation costs.
- 6The company acquired Northeast Veterinary Supply Company (NEVSCO) for $70.0 million to bolster its animal health business.
- 7Cash provided by operating activities was $10.3 million, a significant improvement from the $430.4 million used in the prior year period, partly due to the tax reform's impact on deferred taxes and income taxes payable.