Core Insights - Medical supplies stocks are typically not seen as high-return investments due to thin margins and regulatory pressures, making outperformance unlikely in a challenging macro environment [1] - However, companies like Cardinal Health, McKesson, and Cencora have achieved significant stock returns over the past year, outperforming the broader market with gains of 66.4%, 39.5%, and 42.2% respectively [2] Company Performance Cardinal Health - Cardinal Health has shown a turnaround with double-digit operating earnings growth across all segments in Q1 of fiscal 2026, indicating broad improvement [4][8] - Revenues increased by 22% year over year to $64 billion, driven by strong pharmaceutical demand and GLP-1 volumes, with the Pharmaceutical and Specialty Solutions segment profit rising by 26% [5] - The company is expanding its specialty business, including the acquisition of Solaris Health, aimed at enhancing provider relationships [6][8] - Cardinal Health generated $1.3 billion in adjusted free cash flow and returned $500 million to shareholders through dividends and buybacks [9] McKesson - McKesson reported 10% revenue growth to $103 billion and 39% adjusted EPS growth in Q2 of fiscal 2026, showcasing its operational excellence [11] - The Oncology and Multispecialty segment saw revenues jump by 32% and operating profit surge by 71%, driven by strong specialty volumes and acquisitions [12] - The company generated $2.2 billion in free cash flow and returned $907 million to shareholders, primarily through share repurchases [13] Cencora - Cencora's performance reflects the strength of specialty-focused distribution, with 6% revenue growth and 15% adjusted EPS growth in Q4 of fiscal 2025 [16] - Operating income rose by 20% year over year, supported by strong specialty demand and the acquisition of Retina Consultants of America [17] - The company plans to invest approximately $1 billion through 2030 to enhance distribution capacity and cold-chain infrastructure [18]

Financial Data and Key Metrics Changes - Cencora achieved adjusted operating income and adjusted diluted EPS growth of 16% in fiscal 2025 [3][11] - Adjusted diluted EPS for Q4 was $3.84, a 15% increase, with consolidated revenue of $83.7 billion, up 6% [12][19] - Consolidated gross profit was $2.9 billion, up 18%, with a gross profit margin of 3.47%, an increase of 37 basis points [12][13] - Consolidated operating income was $1.0 billion, up 20% compared to the prior year quarter [13][19] - Consolidated revenue for fiscal 2025 was $321.3 billion, up 9% [19] Business Line Data and Key Metrics Changes - U.S. healthcare solutions segment revenue was $75.8 billion, up approximately 6% year-over-year, with operating income increasing by 25% to $872 million [15][16] - International healthcare solutions segment revenue was $7.9 billion, an increase of 8% on an as-reported basis, but operating income decreased by 2% [16][17] - GLP-1 products contributed $876 million, or 10% year-over-year growth, to the U.S. healthcare solutions segment [15][16] Market Data and Key Metrics Changes - The international healthcare solutions segment saw a rebound in global specialty logistics business, with shipment volumes returning to growth [17][56] - The U.S. healthcare solutions segment continues to benefit from strong utilization trends, particularly in specialty [15][52] Company Strategy and Development Direction - Cencora's strategy focuses on three growth priorities: leading with market leaders, enhancing patient access to pharmaceuticals, and strengthening its position in specialty [4][29] - The company is raising long-term guidance for adjusted operating income growth to 6-9% and adjusted EPS growth to 9-13% [4][28] - Significant investments totaling $1 billion through 2030 are planned to enhance distribution network and specialty distribution capacity [9][10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in continued market growth and the strength of the business, emphasizing the importance of strategic investments [3][4] - The company is focused on enhancing productivity and efficiency in serving the pharmaceutical supply chain [5][10] - Management acknowledged the impact of losing an oncology customer but remains optimistic about future growth [26][40] Other Important Information - The company announced a 9% increase in its quarterly dividend, marking the 21st consecutive annual dividend increase [20] - A strategic review led to the identification of businesses that do not align closely with future strategy, including MWI Animal Health and certain components of Pharmalex [7][21] Q&A Session Summary Question: Strategic view on business and potential divestitures - Management emphasized a focused strategic execution and the importance of investing in areas aligned with their strategy [31][32] Question: Next steps for the MSO platform - Management discussed leveraging capabilities across MSO platforms and the potential for shared resources to enhance care delivery [36][37] Question: U.S. healthcare segment performance and growth durability - Management highlighted strong performance in the U.S. segment, with adjusted operating income growth of 25%, and expressed confidence in sustaining growth despite headwinds [39][40] Question: International business growth outlook - Management indicated confidence in returning to growth in the international segment, driven by strong demand for specialty logistics and a tailored portfolio [55][56] Question: Profitability and strategic alternatives for businesses in the "other" segment - Management confirmed that all businesses in the "other" segment are currently profitable and discussed the potential for strategic alternatives to enhance long-term success [59][60]