AmerisourceBergen (ABC) Beats on Q3 Earnings, Ups '23 EPS View
AmerisourceBergen Corporation ABC reported fiscal third-quarter 2023 adjusted earnings per share (EPS) of $2.92, which beat the Zacks Consensus Estimate of $2.83 by 3.2%. The bottom line improved 11.5% year over year.
GAAP EPS was $2.35, up 22.4% from that reported in the year-ago period.
Revenue Details
Revenues totaled $66.95 billion, up 11.5% year over year. The top line beat the Zacks Consensus Estimate by 5.6%.
Segmental Analysis
U.S. Healthcare Solutions
Revenues at this segment totaled $59.9 billion, up 12.2% on a year-over-year basis. This improvement was due to overall market growth and increased specialty product sales. Lower revenues from commercial COVID-19 treatments partially offset the upside.
Segmental operating income totaled $635.2 million, up 9.5% year over year. Higher gross profit (which included fees earned from the distribution of government-owned COVID-19 treatments and gross profit on sales to specialty physician practices) contributed to the upside.
International Healthcare Solutions
This segment includes Alliance Healthcare, World Courier, Innomar and Profarma Specialty.
Revenues totaled $7 billion, up 5.6% year over year on the back of increased revenues across all businesses, offset partially by the divestiture of its Brazilian specialty business. Revenues increased 12.4% at constant currency (cc).
Operating income totaled $187.1 million, up 6.2% reportedly and 7.3% at cc.
Margin Analysis
AmerisourceBergen reported an adjusted gross profit of $2.2 billion, up 8% on a year-over-year basis. As a percentage of revenues, the adjusted gross margin was 3.3%, down 11 basis points (bps) year over year.
The company recorded an adjusted operating income of $822.3 million, up 8.7% year over year. The metric was up 9% at cc. As a percentage of revenues, the adjusted operating margin was 1.2%, which contracted 3 bps from the year-ago quarter’s number.
Financial Position
ABC exited the fiscal third quarter with cash and cash equivalents worth $1.39 billion compared with $1.54 billion in the prior-year quarter.
Cumulative net cash used in operating activities totaled $2.1 billion compared with $1.54 billion in the year-ago period.
Dividend Update
During the quarter, AmerisourceBergen's board of directors declared a quarterly dividend of 48.5 cents per share, payable on Aug 28, to shareholders of record at the close of business on Aug 11, 2023.
AmerisourceBergen Corporation Price, Consensus and EPS Surprise
AmerisourceBergen Corporation price-consensus-eps-surprise-chart | AmerisourceBergen Corporation Quote
Fiscal 2023 Guidance
The company raised its 2023 outlook for earnings and revenues to reflect strong performance so far in 2023 and favorable foreign currency translation rates.
Adjusted EPS is now estimated in the range of $11.85-$11.95, indicating growth of 7-8% from the previous year’s projection. The Zacks Consensus Estimate for the same is currently pegged at $11.89. Previously, the company expected adjusted EPS in the band of $11.75-$11.90.
Revenues are now projected to increase at least 8% compared with the previous expectation of 6-8% growth. The top line at the U.S. Healthcare Solutions segment is expected to grow at least 9%, up from the prior guided range of 7-8%. Revenues at the International Healthcare solutions business are estimated to be up 1-4% versus the earlier guidance of flat to down 3%.
Adjusted EPS is estimated to improve 9-10% at cc, up from the previous guidance of 8-10%. Excluding contributions related to COVID-19 and currency fluctuations, the figure is projected to increase 13-14% compared with the previous expectation of 13-15%.
Adjusted operating income is expected to gain 3-4% versus 2-4% previously. Operating income at the U.S. Healthcare Solutions segment is now anticipated to grow 4-5% compared with the previous expectation of 3-5%. For the International Healthcare Solutions segment, the company's revised guidance for the metric is 0-4% compared with the prior projection of 3% decline to 1% growth.
Summing Up
AmerisourceBergen exited the fiscal third-quarter on a strong note, wherein both earnings and revenues beat the consensus mark. The company witnessed a strong segmental performance due to growth in all markets and strong demand for specialty products.
Per management, AmerisourceBergen delivered a solid performance by playing a crucial role in the healthcare system while maintaining efficiency throughout its business. The company remains focused on its strategic priorities and thoughtful capital deployment to deliver long-term growth.
ABC recently acquired a minority stake in a network of leading oncology practices, OneOncology, which is likely to further strengthen its relationship with community oncologists and expand its specialty solutions. Meanwhile, the company announced that it will change its name and ticker symbol to Cencora and COR, respectively, effective Aug 30.
However, the company faces headwinds like conversion of branded drugs and lower-price generics. Cut-throat competition in the MedTech space remains a concern.
Zacks Rank
AmerisourceBergen currently carries a Zacks Rank #2 (Buy).
Other Stocks to Consider
Some other top-ranked stocks in the broader medical space that have announced quarterly results are Abbott Laboratories ABT, Elevance Health, Inc. ELV and Intuitive Surgical, Inc. ISRG.
Abbott, carrying a Zacks Rank of 2 at present, reported second-quarter 2023 adjusted EPS of $1.08, which beat the Zacks Consensus Estimate by 3.8%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Revenues of $9.98 billion outpaced the consensus mark by 2.9%.
Abbott has a long-term estimated growth rate of 5.1%. ABT’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 12.4%.
Elevance Health reported second-quarter 2023 adjusted EPS of $9.04, which beat the Zacks Consensus Estimate by 2.5%. Revenues of $43.38 billion surpassed the Zacks Consensus Estimate by 4.5%. The company currently carries a Zacks Rank #2.
ELV has a long-term estimated growth rate of 12.1%. Its earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 2.8%.
Intuitive Surgical reported second-quarter 2023 adjusted EPS of $1.42, which beat the Zacks Consensus Estimate by 7.6%. Revenues of $1.76 billion surpassed the consensus mark by 1.4%. The company currently carries a Zacks Rank #2.
ISRG has a long-term estimated growth rate of 14.5%. Its earnings surpassed estimates in three of the trailing four quarters and missed once, delivering an average surprise of 4.2%.
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