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AmerisourceBergen (ABC) Down 0.7% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for AmerisourceBergen (ABC). Shares have lost about 0.7% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is AmerisourceBergen due for a breakout? 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 Q2 Earnings Top Estimates, Revenues Lag

AmerisourceBergen Corporation reported second-quarter fiscal 2021 adjusted earnings per share of $2.53 surpassing the Zacks Consensus Estimate of $2.51 by 0.8%. The bottom line also improved 5.4% year over year.

The better-than-expected bottom-line performance can be attributed to higher adjusted operating income.

Revenue Details

Revenues increased 3.7% to $49.15 billion in the reported quarter. However, the top line missed the Zacks Consensus Estimate by 1.6%.

Segmental Analysis

Pharmaceutical Distribution Segment

Revenues at this segment totaled $47.10 billion, reflecting an increase of 3.4% on a year-over-year basis on the back of increase in specialty product sales, including COVID-19 treatments.

Segmental operating income was $589 million, up 4.6% year over year. Higher sales of specialty products contributed to the upside.

Other Segment

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

Revenues at this segment were $2.09 billion, up 11.5% year over year. The upside was driven by growth across all three operating segments.

Operating income in the segment was $123.2 million in the quarter, up 13.8% year over year primarily due to growth in World Courier and MWI.

Margin Analysis

In the quarter under review, AmerisourceBergen reported adjusted gross profit of $1.51 billion, up 6.7% on a year-over-year basis. As a percentage of revenues, adjusted gross margin was 3.1% in the quarter, up 20 basis points (bps) a year-over-year basis.

The company reported adjusted operating income of $706.6 million, up 5.2% year over year. As a percentage of revenues, adjusted operating margin was 1.4% in the quarter, which expanded 2 bps from the year-ago quarter.

Fiscal 2021 Guidance Updated

AmerisourceBergen has updated its fiscal 2021 outlook, indicating sustained solid performance that comprises better-than-expected performance in its Global Commercialization Services & Animal Health unit and an incrementally higher estimated share count for the year.

Adjusted earnings per share is now estimated to be $8.45-$8.60 (up from the prior-guided range of $8.40-$8.60). The Zacks Consensus Estimate currently stands at $8.54.

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

Adjusted operating income is now projected to grow in high-single-digit percent range.

Operating income at Pharmaceutical Distribution Services segment is now anticipated to improve in high-single-digit percent range.

For the Other segment, the metric is estimated to grow in the low-double digit percent rage (up from the prior mid-to-high single digit percent range).
Adjusted free cash flow is estimated to be around $1.5 billion.

The company anticipates adjusted effective tax rate to be 21-22%.

Adjusted operating expenses is projected to increase in the high-single digit percent range (narrowed from the previous mid-to high-single-digit percent range).

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month.

VGM Scores

At this time, AmerisourceBergen has a great 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 20% 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

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions has been net zero. Notably, 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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