AmerisourceBergen (ABC) Up 5% Since Last Earnings Report: Can It Continue?

It has been about a month since the last earnings report for AmerisourceBergen (ABC). Shares have added about 5% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is AmerisourceBergen due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

AmerisourceBergen Q4 Earnings & Revenues Beat Estimates

AmerisourceBergen Corporation reported fourth-quarter fiscal 2019 adjusted earnings per share of $1.61 surpassing the Zacks Consensus Estimate of $1.58 by 1.9%. The figure also improved 11% year over year.

The better-than-expected bottom-line performance can be attributed to increase in adjusted operating income, lower share count and reduced net interest expense.

Revenues improved 5.4% to $45.64 billion in the reported quarter. Moreover, the figure beat the Zacks Consensus Estimate by 0.7%.

FY19 at a Glance

For fiscal 2019, the company reported adjusted earnings of $7.09 per share, up 9.2% from the year-ago period. The metric exceeded the Zacks Consensus Estimate of $7.05 per share.

Revenues totaled $179.56 billion, up 6.9% year over year, which beat the Zacks Consensus Estimate of $179.37 billion.

Segmental Analysis

Pharmaceutical Distribution Segment

Revenues at this segment totaled $43.87 billion, improved 5.1% on a year-over-year basis. Consistent robust specialty product sales and increase in volume related to growth of some of its largest customers contributed to the improvement.

Segmental operating income was $369.3 million, up 3.5% year over year. Increase in gross profit drove the upside. However, an increase in operating expenses partially offset the uptick.

Other Segment

This segment includes AmerisourceBergen Consulting Services (ABCS), World Courier and MWI Veterinary Supply.

Revenues at this segment came in at $1.79 billion, up 12.6% year over year. This upside was driven by ABCS's growth in Canadian operations and MWI.
Operating income in the segment was $86.7 million in the quarter, up 14.9% year over year primarily on the back of the results at MWI, World Courier and ABCS’s Lash Consulting Services.

Margin Analysis

In the quarter under review, AmerisourceBergen reported adjusted gross profit of $1.25 billion, up 6.9% on a year-over-year basis. As a percentage of revenues, adjusted gross margin was 2.7% in the quarter, which remained marginally flat year over year.

AmerisourceBergen reported adjusted operating income of $456.1 million, up 5.5% year over year. As a percentage of revenues, adjusted operating margin was 1% in the quarter, which remained flat from the prior-year quarter.
 
Fiscal 2020 Guidance

The company estimates revenue growth in the mid-to-high single digit percent range.

Adjusted EPS is now estimated in the range of $7.30-$7.60. The Zacks Consensus Estimate is currently pegged at $7.57, which is within management’s guided range.

Adjusted operating income is projected to grow in the low-to-mid single digit percent range.

Operating income at Pharmaceutical Distribution Services segment is expected to improve in the low-to-mid single digit percent range. For the Other segment the metric is estimated to grow in the high-single digit percent range.

Adjusted operating expenses is projected to increase in the mid-single digit percent range.

Adjusted free cash flow is estimated to be around $1.5 billion.

The company anticipates adjusted effective tax rate in the range of 21-22%.

Further, the company anticipates weighted average diluted shares to range between 209 million and 210 million.

How Have Estimates Been Moving Since Then?

Fresh estimates followed a downward path over the past two months.

VGM Scores

Currently, AmerisourceBergen has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

AmerisourceBergen has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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