# Cencora (COR) Financial Model Free Excel 3-statement financial model and company analysis for Cencora. - Canonical: https://finamodel.com/companies/cencora - Industry: Healthcare Services - Downloadable model: Yes - Excel download: https://finamodel.com/company-models/COR.xlsx ## Model Purpose This model provides a comprehensive three-statement forecast and discounted cash flow valuation to help an equity analyst determine the intrinsic value of Cencora based on pharmaceutical volume trends, generic pricing dynamics, and capital allocation strategies. ## Company Overview Cencora, formerly AmerisourceBergen, is one of the largest global pharmaceutical sourcing and distribution services companies. It provides drug distribution and related services designed to reduce costs and improve patient outcomes. - **U.S. Healthcare Solutions (approx. 89% of revenue):** Distributes brand-name and generic pharmaceuticals, specialty pharmaceutical products, and over-the-counter healthcare products in the United States. - **International Healthcare Solutions (approx. 11% of revenue):** Consists primarily of Alliance Healthcare, providing pharmaceutical distribution and related services in Europe and other global markets. - **Key geographies:** United States, Europe. - **Business model type:** Asset-light, high-volume, low-margin distribution and logistics. - **Competitive position:** Operates in an oligopoly alongside McKesson and Cardinal Health, holding significant market share in the U.S. pharmaceutical distribution market. - **Recent major events:** Rebranded from AmerisourceBergen to Cencora in 2023. Acquired Retina Consultants of America (RCA) in January 2025 to bolster its specialty services. ## Revenue Deep Dive ### U.S. Healthcare Solutions - **Segment name:** U.S. Healthcare Solutions - **Revenue driver formula:** Overall Prescription Volume x Average Drug Price + Specialty Services Revenue - **Historical growth rate:** 8-11% CAGR over the last 3 years. - **Key growth levers and headwinds:** Growth in specialty pharmaceuticals, GLP-1 drug volumes, and aging population demographics. Headwinds include generic drug deflation and customer consolidation. - **Pricing dynamics:** Highly contractual, often tied to wholesale acquisition cost (WAC) with specified discounts. - **Revenue recognition notes:** Recognised upon delivery of products. - **Seasonality:** Relatively stable, though winter months can see slight bumps due to flu season. ### International Healthcare Solutions - **Segment name:** International Healthcare Solutions - **Revenue driver formula:** European Pharmacy Volume x Regional Pricing + Global Specialty Logistics Revenue - **Historical growth rate:** 5-8% CAGR (heavily influenced by FX). - **Key growth levers and headwinds:** Expansion of value-added services and specialty logistics. Headwinds include European government pricing regulations and foreign currency translation (strong USD). - **Pricing dynamics:** Regulated pricing in many European markets. - **Revenue recognition notes:** Recognised upon delivery. - **Seasonality:** Generally stable across quarters. ## Cost Structure ### Variable Costs / COGS - **Line-by-line breakdown:** Cost of goods sold consists almost entirely of the cost of pharmaceuticals purchased from manufacturers, net of rebates and discounts, plus LIFO adjustments. - **Gross margin range:** 3.2% to 3.6% (extremely low margin, high volume). - **Key input costs and commodity exposures:** Manufacturer drug pricing, generic drug deflation, and LIFO inventory accounting impacts. - **How COGS scales with revenue:** Highly linear; COGS moves almost in lockstep with revenue. ### Operating Expenses - **R&D:** Not material for a distributor. - **SG&A:** Termed "Distribution, selling, and administrative" (DS&A). Covers warehouse operations, logistics, sales force, and corporate overhead. - **Depreciation & Amortisation:** Typically 0.2% to 0.3% of revenue, related to distribution centres and acquired intangibles. - **Stock-Based Compensation:** Relatively small as a percentage of revenue, but material to operating income. - **Restructuring / one-time charges:** Frequent adjustments for antitrust litigation (e.g., opioid settlements) and M&A integration costs. ### Margin Profile - **Gross margin:** 3.2% to 3.6%. - **EBITDA margin:** 1.2% to 1.5%. - **Operating margin:** 0.7% to 1.2%. - **Net margin:** 0.4% to 0.7%. - **Margin trend:** Slowly expanding due to a mix shift towards higher-margin specialty pharmaceuticals and consulting services (like the RCA acquisition). ## Balance Sheet Structure - **Total assets:** Approximately $55 to $60 billion. - **Key asset categories:** Receivables and Inventory make up the vast majority of assets. - **Goodwill & intangibles as % of total assets:** Approximately 25-30%, driven by the Alliance Healthcare and RCA acquisitions. - **Working capital profile:** - **Days Sales Outstanding (DSO):** 20 to 25 days. - **Days Inventory Outstanding (DIO):** 25 to 30 days. - **Days Payable Outstanding (DPO):** 45 to 55 days. - **Net working capital as % of revenue:** Typically negative or very low. - **Is working capital positive or negative?** The company often operates with negative working capital, using supplier payables to fund inventory, which is a structural advantage. - **PP&E:** Distribution centres, cold chain storage facilities, and logistics equipment. - **Right-of-use assets / operating leases:** Material due to leased distribution facilities and vehicle fleets. ## Capital Expenditure & Investment - **Capex as % of revenue:** Approximately 0.15% to 0.25% (very low capital intensity). - **Maintenance capex vs. growth capex:** Roughly 50/50 split. Growth capex is currently focused on a $1 billion investment programme through 2030 to expand U.S. distribution and cold chain capacity. - **Major capex programmes underway or planned:** Building a second national distribution centre and expanding cold chain storage for specialty drugs. - **Capitalised software / development costs if material:** Minor, related to ERP and logistics software. - **M&A pattern:** Strategic bolt-ons and occasional transformational deals (e.g., Alliance Healthcare, RCA, OneOncology). - **Typical acquisition multiple paid:** 10x to 14x EBITDA for specialty services. ## Debt & Capital Structure - **Total debt:** Approximately $7.9 billion. - **Debt/EBITDA ratio:** 1.5x to 2.0x. - **Credit rating:** Investment grade (typically BBB+ / Baa1). - **Key debt instruments:** Senior notes (maturing between 2027 and 2056), variable-rate term loans, and a multi-currency revolving credit facility. - **Maturity profile:** Well-laddered, with recent $3.5 billion issuance in early 2026 to refinance and fund acquisitions. - **Interest rate profile:** Predominantly fixed-rate senior notes, with some floating exposure via term loans and revolvers used for seasonal working capital. - **Covenants:** Standard investment-grade covenants (interest coverage and leverage ratios). - **Share repurchase programme:** Highly active, typically repurchasing $1.5 billion to $2.0 billion annually. - **Dividend policy:** Consistent dividend payer, recently increased to $0.60 per quarter ($2.40 annualised), yielding around 1.0% to 1.5%. ## Cash Flow Characteristics - **Operating cash flow conversion:** Highly variable year-to-year due to working capital swings, but generally >100% of net income over a multi-year period. - **Free cash flow margin:** 0.7% to 1.0% of revenue (translates to $2.5 billion to $3.5 billion absolute FCF). - **Major non-cash items that bridge net income to OCF:** Depreciation, amortisation, LIFO expense/credit, and deferred taxes. - **Working capital cash flow impact:** Massive swings can occur between quarters due to inventory purchasing timing and payable cycles. - **Capex intensity:** Extremely low, allowing for high FCF conversion. - **Cash tax rate vs. GAAP effective tax rate:** Generally aligned, hovering around 20% to 22%. ## Sheet Structure 1. **Assumptions**: Hardcoded drivers for revenue growth by segment, margin profiles, working capital days, capex, and capital return policies. 2. **Revenue & Gross Profit**: Segment build for U.S. Healthcare Solutions and International Healthcare Solutions, including LIFO adjustments. 3. **Operating Expenses**: Detailed build of DS&A, depreciation, amortisation, and litigation/settlement accruals. 4. **Income Statement**: Consolidated P&L from revenue down to GAAP and Adjusted EPS. 5. **Working Capital**: Schedules for Accounts Receivable, Inventory, and Accounts Payable based on DSO, DIO, and DPO. 6. **PP&E & Intangibles**: Capex, depreciation waterfall, goodwill, and amortisation of acquired intangibles. 7. **Debt Schedule**: Tranche-by-tranche debt build, interest expense calculation, and revolver balancing. 8. **Shareholders Equity**: Retained earnings, share repurchases, dividends, and accumulated other comprehensive income (FX translation). 9. **Cash Flow Statement**: Indirect method OCF, investing cash flows, and financing cash flows. 10. **Balance Sheet**: Standard balancing statement. 11. **DCF Valuation**: Unlevered free cash flow build, WACC calculation, terminal value, and implied share price. ## Key Financial Relationships 1. U.S. Healthcare Solutions Revenue = Prior Year U.S. Revenue x (1 + U.S. Segment Growth Rate) 2. International Healthcare Solutions Revenue = Prior Year International Revenue x (1 + International Segment Growth Rate) x (1 + FX Impact) 3. Total Revenue = U.S. Healthcare Solutions Revenue + International Healthcare Solutions Revenue 4. Consolidated COGS = Total Revenue x (1 - Consolidated Gross Margin %) + LIFO Expense/(Credit) 5. Distribution, Selling, and Administrative (DS&A) Expense = Total Revenue x DS&A Margin % 6. Adjusted Operating Income = Total Revenue - Consolidated COGS - DS&A Expense 7. Accounts Receivable = (Total Revenue / 365) x DSO 8. Inventory = (Consolidated COGS / 365) x DIO 9. Accounts Payable = (Consolidated COGS / 365) x DPO 10. Net Interest Expense = (Average Fixed Debt x Fixed Rate) + (Average Floating Debt x Floating Rate) - Interest Income on Cash 11. Share Count = Prior Period Share Count - (Share Repurchases / Average Share Price) 12. Dividends Paid = Share Count x Annualised Dividend per Share ## Cross-Sheet Dependencies - The **Assumptions** sheet feeds all primary drivers across the model. - **Revenue & Gross Profit** feeds the top line of the **Income Statement** and drives the activity levels in the **Working Capital** sheet. - **Working Capital** changes feed directly into the **Cash Flow Statement** (Operating Cash Flow). - The **Debt Schedule** calculates interest expense, which feeds the **Income Statement**, while the ending debt balances feed the **Balance Sheet**. - The **Cash Flow Statement** determines the ending cash balance or required revolver draw, creating a circular reference with the **Debt Schedule** (interest expense depends on debt, which depends on cash flow, which depends on interest expense). - **PP&E & Intangibles** feeds depreciation and amortisation to both the **Income Statement** and the **Cash Flow Statement**. ## Sign Convention - Revenue, assets, and equity are positive. - Expenses (COGS, SG&A, Interest, Taxes) are entered as positive numbers in their supporting schedules but subtracted in the Income Statement. - On the Cash Flow Statement, cash inflows are positive and cash outflows (capex, dividends, share repurchases, debt paydowns) are negative. - Contra-asset accounts (accumulated depreciation) are negative. ## Things Most Likely to Go Wrong - Working capital swings: A 1-day error in DPO assumptions can swing cash flow by nearly $1 billion due to the massive revenue base. - LIFO accounting: The company uses LIFO for U.S. inventory. Model must account for LIFO credits/expenses which distort gross margin in inflationary/deflationary environments. - Litigation adjustments: GAAP earnings are frequently distorted by opioid litigation settlements and antitrust gains. The model must focus on Adjusted Operating Income for core valuation. - FX translation: International Healthcare Solutions revenue is highly sensitive to EUR/USD and GBP/USD exchange rates. - Margin precision: Because gross margins are extremely narrow (~3.5%), a 10 basis point error in margin assumptions results in a massive variance in operating income. - Non-controlling interests: The RCA acquisition included a 15% equity interest retained by physicians, accounted for as a contingent liability rather than standard NCI. - Seasonality in debt: The company uses its revolving credit facility heavily for intra-quarter working capital needs, meaning average debt balances are often higher than period-end balances. - Share count reduction: The company aggressively buys back stock. Failing to model the declining share count will severely understate future EPS. ## Validation Checks - Gross margin should remain tightly bound between 3.2% and 3.8%; flag if it moves outside this range. - Operating margin must not exceed 1.5% without a specific structural justification. - DSO, DIO, and DPO should remain relatively constant; flag if DPO drops below 45 days. - Free cash flow conversion (FCF / Adjusted Net Income) should average around 100% over a 3-year period. - Debt/EBITDA should remain below 2.5x to maintain the investment-grade rating. - Balance sheet must balance: Total Assets = Total Liabilities + Equity in every period. - Capex as a percentage of revenue should not exceed 0.3%. - The effective tax rate should remain between 20% and 23%. ## Key Assumptions (Default Values) | Assumption | Default Value | Unit | Rationale | |---|---|---|---| | U.S. Healthcare Solutions Growth | 8.5 | % | Based on recent FY2025 performance and specialty drug momentum | | International Healthcare Solutions Growth | 6.5 | % | Based on constant currency guidance for FY2025/2026 | | Consolidated Gross Margin | 3.50 | % | Reflects recent expansion from RCA acquisition and specialty mix | | DS&A as % of Revenue | 2.20 | % | Historical average, adjusting for recent M&A integration costs | | Days Sales Outstanding (DSO) | 22 | Days | Calculated from recent receivables and revenue | | Days Inventory Outstanding (DIO) | 28 | Days | Calculated from recent inventory and COGS | | Days Payable Outstanding (DPO) | 52 | Days | Calculated from recent payables and COGS | | Capex as % of Revenue | 0.20 | % | Reflects the $1 billion investment programme through 2030 | | Effective Tax Rate | 21.5 | % | Management guidance and historical average | | Annual Share Repurchases | 1,500 | $ Millions | Consistent with historical capital return policy | | Quarterly Dividend per Share | 0.60 | $ | Declared rate as of late 2025 | | Weighted Average Interest Rate | 4.5 | % | Blended rate of recent 2026 senior note issuances and legacy debt | | WACC | 7.5 | % | Low beta defensive stock, offset by current risk-free rates | | Terminal Growth Rate | 2.0 | % | Aligns with long-term GDP and healthcare inflation | ## Data Sources & Benchmarks - SEC EDGAR: Cencora (COR) 10-K and 10-Q filings. - Investor Relations: investor.cencora.com for earnings presentations and supplemental non-GAAP reconciliations. - Key peers for benchmarking: McKesson (MCK), Cardinal Health (CAH). - Industry data sources: IQVIA for pharmaceutical volume and pricing trends, CMS national health expenditure projections. - Consensus estimates source: FactSet or Bloomberg for forward EPS and revenue estimates. ## Sources - Cencora Q4 FY2025 Earnings Release (November 2025) - Cencora Q1 FY2026 Earnings Release (February 2026) - Cencora 8-K Filing on Capital Structure Changes (February 2026) - Cencora Investor Relations Website (investor.cencora.com) - SEC EDGAR Database (Company Filings for COR) --- ## Frequently asked questions ### What does Cencora do as a company? Cencora, formerly AmerisourceBergen, is one of the largest global pharmaceutical sourcing and distribution services companies. It provides drug distribution and related services designed to reduce costs and improve patient outcomes, primarily operating in the U.S. and Europe. ### What are the primary drivers of Cencora's revenue growth? Cencora's revenue growth is primarily driven by pharmaceutical volume trends, generic pricing dynamics, and strategic capital allocation. Its U.S. Healthcare Solutions segment contributes approximately 89% of its total revenue. ### What is Cencora's typical capital expenditure as a percentage of revenue? Cencora operates with very low capital intensity, with capital expenditure typically ranging from 0.15% to 0.25% of revenue. The company has a planned $1 billion investment program through 2030 to expand U.S. distribution and cold chain capacity. ### What is the purpose of the Cencora financial model? The Cencora financial model provides a comprehensive three-statement forecast and discounted cash flow (DCF) valuation. Its primary purpose is to help an equity analyst determine the intrinsic value of Cencora based on key industry and company-specific factors. ### Can I download an Excel financial model for Cencora? Yes, a downloadable Excel financial model for Cencora is available. This model provides a detailed forecast horizon from FY2026 through FY2030 for financial analysis. ### How does Cencora's working capital profile impact its business model? Cencora often operates with negative net working capital, which is a structural advantage in its asset-light, high-volume, low-margin distribution business. This profile allows the company to effectively use supplier payables to fund its inventory. [Interactive forecast calculator](https://finamodel.com/companies/cencora/forecast)