Cencora, Inc. (COR) Cash Flow Statement

The OCF/NI ratio is highly erratic, ranging from -9.22 to 295.80, indicating that net income is a poor proxy for cash generation in any given quarter. The large working capital changes, such as $2.2B in 2025Q2 and -$3.6B in 2025Q1, suggest that cash flow is heavily influenced by the timing of inventory purchases and customer payments, which is typical for a high-volume distributor. Investors should focus on annual or multi-quarter averages to assess true conversion quality.

Despite the quarterly swings, the cumulative FCF over the ten quarters is positive, suggesting that the business generates cash over time. The FCF margin in 2026Q3 was 2.9%, which is above the peer average of around 1.7%, indicating that Cencora is converting revenue to cash more efficiently than McKesson or Cardinal Health. However, the negative FCF quarters in 2025Q1 and 2026Q1 highlight the need for careful liquidity management, especially given the high leverage.

CapEx/Revenue has remained consistently below 0.3%, which is typical for a distribution business that relies on third-party logistics and does not own extensive manufacturing assets. This low capital intensity means that Cencora can return a high proportion of operating cash flow to shareholders, but it also implies that growth is dependent on acquisitions rather than organic capacity expansion. The modest CapEx levels suggest that maintenance capex is minimal, and the company is not investing heavily in new infrastructure.

The large swings in working capital are consistent with the pharmaceutical distribution model, where inventory purchases and customer payments can vary significantly due to drug pricing and order timing. The positive working capital changes in quarters like 2026Q3 ($1.6B) suggest that Cencora is collecting receivables faster or reducing inventory, while negative changes in 2026Q1 (-$3.4B) indicate the opposite. This volatility is not necessarily a sign of operational weakness but rather reflects the inherent lumpiness of the business, and investors should monitor the efficiency of the cash conversion cycle over longer periods.

The $4.7B acquisition outflow in 2026Q2 is the largest single deployment item in the period, dwarfing dividends and buybacks. This aligns with management's historical strategy of pursuing strategic acquisitions like Alliance Healthcare to expand into higher-margin segments. Dividends have been consistent, growing modestly from $100.9M to $116.6M per quarter, but buybacks have been inconsistent, with notable repurchases in 2024Q4 and 2025Q1. The heavy acquisition spending, combined with high leverage, suggests that future capital deployment may be constrained, and investors should watch for potential debt reduction or equity issuance.

The cumulative OCF/NI ratio of approximately 1.6 suggests that Cencora's earnings quality is high, with cash flows consistently outpacing net income. This is partly due to non-cash charges like depreciation and amortization, but also reflects the company's ability to manage working capital effectively over time. The divergence between cumulative earnings and cash flow is positive, but the quarterly swings warrant caution, as they could indicate that management is using working capital timing to smooth earnings. Investors should continue to monitor the sustainability of this trend, especially given the potential for opioid litigation cash outflows.