Cencora stock and shares of other drug distributors took a hit on Thursday morning as Walgreens Boots Alliance announced weaker-than-expected results and signaled "significant" store closings ahead.
WBA attributed part of its soft results to a weaker retail pharmacy market and continued reimbursement pressures. Cencora bore the brunt, but McKesson and Cardinal Health also fell. Walgreens is Cencora's biggest customer, accounting for 26% of fiscal 2023 revenue, according to a morning note from Leerink.
However, Leerink said that the hit to Cencora earnings before interest and taxes may be just 2%, assuming a one-fourth cut toWalgreens prescriptions from store closures.
Cencora, formerly AmerisourceBergen, changed its company name in August 2023.
Walgreens shares dived nearly 25% to a level last seen more than a quarter-century ago.
CVS Health stock also came under pressure as Walgreens cuts its fiscal 2024 earnings outlook to $2.80 to $2.95 a share from $3.20 to $3.25.
Cencora stock gapped lower at the open, about a half-hour before the Supreme Court invalidated the $6 billion opioid settlement that shielded the Sackler family from further financial jeopardy. To be clear, that settlement — and Thursday's 5-4 ruling — was entirely separate from the $26 billion settlement reached in 2021 by Johnson & Johnson and three big drug distributors, Cencora (then AmerisourceBergen), McKesson and Cardinal Health.
Analysts generally saw the 2021 resolution as a positive for the group. It went a long way in limiting open-ended liability, and the drug distributors had already set aside reserves to cover the cost. Four states opted not to join the national settlement and were able to continue their legal fight.
But the settlement meant that families hurt by the opioid crisis didn't have the same opportunity to pursue legal claims against the Sackler family. The Supreme Court ruled that the settlement, which was part of a bankruptcy reorganization of opioid maker Purdue Pharma, wrongly protected members of the Sackler family who didn't declare bankruptcy.
Cencora Stock, MCK, CAH And CVS
Cencora stock pared its early loss to 4.2%, cutting below its 50-day moving average in very heavy trade. The stock, up about 10% so far this year, ended Wednesday just below a buy point.
McKesson lost 1.9% Thursday, testing support at its 21-day exponential average. Cardinal Health's 2.5% drop sent it below its 50-day line.
Meanwhile, CVS fell 4%, suffering a setback as it tries to recover after tumbling to a four-year low.
