AmerisourceBergen (ABC) Hits 52-Week High: What's Aiding It?
Shares of AmerisourceBergen Corporation ABC scaled a new 52-week high of $129.92 on Dec 23, before closing the session marginally lower at $129.53.
Over the past year, this Zacks Rank #3 (Hold) stock has gained 33.8% compared with 15.5% growth of the industry and 27.1% rise of the S&P 500 composite.
AmerisourceBergen is witnessing an upward trend in its stock price, prompted by its robust World Courier business. A solid fourth-quarter fiscal 2021 performance, along with its strength in its Pharmaceutical Distribution, is expected to contribute further. However, stiff competition and generic deflation persist.
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Let’s delve deeper.
Key Growth Drivers
Strength in World Courier Business: Investors are upbeat about AmerisourceBergen’s World Courier’s solid foothold in global specialty logistics services, which has been driving compelling volume growth and overall performance for the company. During fourth-quarter fiscal 2021, the business continued to provide high-specialty logistics worldwide despite the challenging global logistics environment, while boosting innovation with clinical trials in at-home settings.
Going forward, World Courier will continue to design and deploy patient-centric and forward-thinking transport services in new areas like in-home clinical trials, making treatment in patients’ homes possible in virtually every therapeutic area.
Pharmaceutical Distribution in Focus: AmerisourceBergen’s Pharmaceutical Distribution business has been witnessing strong revenue growth in the last couple of quarters, thereby raising investors’ optimism. The segment rides on increasing volume and an expanding customer base. Strong organic growth rate in the U.S. pharmaceutical market, improving patient access to medical care, improved economic conditions and population demographics should benefit the segment in the quarters to come.
In fourth-quarter fiscal 2021, revenues in the segment reflected a robust year-over-year increase driven by improvement in specialty product sales, including COVID-19 treatments coupled with overall market growth.
Strong Q4 Results: AmerisourceBergen’s robust fourth-quarter fiscal 2021 results buoy optimism. The company’s solid organic revenue growth and robust business segments continue to drive its performance. The quarterly performance highlights sustained solid performance across AmerisourceBergen’s businesses. Per the fourth-quarter fiscal 2021 earnings call, the company had provided its expertise, capabilities and infrastructure in order to facilitate the national distribution of COVID-19 therapies. This helped in the distribution of above 75 million vaccines to patients in more than 30 countries through its expanded global footprint. Expansion in both margins bodes well.
Downsides
Generic Deflation: Generic deflation has been higher than historic norms for several quarters for AmerisourceBergen, creating a headwind for the business. Generic deflation is still mid to high single-digits for the company. The company has been impacted by several factors, including accelerated deflation of generic drugs and a lower contribution from generic launches. These trends have intensified the effect of a shift in product mix toward lower-margin, higher-priced specialty and branded drugs, as well as the lack of generic inflation.
Stiff Competition: AmerisourceBergen operates in a highly competitive pharmaceutical distribution and related health care services market. The company’s primary competitors are key MedTech players along with national generic distributors and regional distributors. The company faces additional competition from manufacturers, chain drugstores, specialty distributors and packaging and health care technology companies.
Key Picks
Some better-ranked stocks in the broader medical space are Laboratory Corporation of America Holdings LH or LabCorp, Thermo Fisher Scientific Inc. TMO and AMN Healthcare Services AMN.
LabCorp, flaunting a Zacks Rank #1 (Strong Buy), has an estimated long-term growth rate of 10.6%. LH’s earnings surpassed estimates in the trailing four quarters, the average surprise being 25.73%. You can see the complete list of today’s Zacks #1 Rank stocks here.
LabCorp has gained 49.1% compared with the industry’s 15.5% rise over the past year.
Thermo Fisher has an estimated long-term growth rate of 14%. TMO’s earnings surpassed estimates in the trailing four quarters, the average surprise being 9.02%. It currently carries a Zacks Rank #2 (Buy).
Thermo Fisher has gained 41.2% compared with the industry’s 9.4% rise over the past year.
AMN Healthcare has an estimated long-term growth rate of 16.2%. AMN’s earnings surpassed estimates in the trailing four quarters, the average surprise being 19.51%. It currently sports a Zacks Rank #1.
AMN Healthcare has gained 76.6% against the industry’s 58.6% fall over the past year.
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Laboratory Corporation of America Holdings (LH) : Free Stock Analysis Report
Thermo Fisher Scientific Inc. (TMO) : Free Stock Analysis Report
AmerisourceBergen Corporation (ABC) : Free Stock Analysis Report
AMN Healthcare Services Inc (AMN) : Free Stock Analysis Report
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