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AmerisourceBergen (ABC) Q2 Earnings Beat, Revenues Miss

Zacks Equity Research

AmerisourceBergen Corporation ABC delivered second-quarter fiscal 2019 adjusted earnings per share (EPS) of $2.11 surpassing the Zacks Consensus Estimate of $1.96 by 7.7%, maintaining its streak of positive earnings surprises. The figure also improved 8.8% year over year. 
 

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

Revenues improved 5.6% to $43.32 billion in the reported quarter. However, the figure missed the Zacks Consensus Estimate of $43.58 billion by 0.6%.
 

Segmental Analysis
 

Pharmaceutical Distribution Segment
 

Revenues at this segment totaled $41.68 billion, increasing 5.6% on a year-over-year basis. Overall market growth, consistent robust specialty product sales and increase in some of its largest customers contributed to the improvement.
 

Segmental operating income was $517 million, up 5.7% 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 $1.67 billion, up 4.5% year over year. This upside was driven by ABCS's growth in Canadian operations, World Courier business and MWI. 
 

Operating income in the segment was $99.9 million in the quarter, up 2.9% year over year. Higher operating income at the company’s Canadian operations and World Courier business led to the improvement.

AmerisourceBergen Corporation Price, Consensus and EPS Surprise

 

AmerisourceBergen Corporation Price, Consensus and EPS Surprise | AmerisourceBergen Corporation Quote

Margin Analysis

In the quarter under review, AmerisourceBergen registered adjusted gross profit of $1.3 billion, up 3.2% on a year-over-year basis. As a percentage of revenues, adjusted gross margin was 3% in the quarter, down 7 basis points year over year.
 

AmerisourceBergen registered adjusted operating income of $616.7 million, up 5.2% year over year. As a percentage of revenues, adjusted operating income was 1.4% in the quarter, down 1 basis point year over year.
 

Guidance Revised
 

Adjusted EPS is now estimated in the range of $6.70-$6.90 (up from the previously guided range of $6.65-$6.85). The Zacks Consensus Estimate is currently pegged at $6.75, which is within the guided range.
 

Further the company anticipates weighted average diluted shares to be about 214 million, down from the previous estimate of around 215 million.
 

It is important to note here that per management all the other previously announced aspects of the company’s fiscal year 2019 financial guidance and assumptions remain intact.
 

Bottom Line
 

AmerisourceBergen exited the fiscal second quarter on a mixed note, wherein the bottom line beat the consensus mark while the top line missed the same. Nonetheless, the company continues to gain from its Pharmaceutical segment and World Courier business, which have been raking in huge profits since quite some time. Its specialty distribution business also continues to contribute significantly to its top line. Additionally, AmerisourceBergen’s Global Commercialization Services and Animal Health unit witnessed a strong second quarter. A raised EPS guidance for 2019 instills investors’ optimism in the stock.
 

Meanwhile, dull performances by the company’s PharMEDium and Lash units have been a headwind over the last couple of quarters. Contraction in gross and operating margin is an added concern. The company faces other headwinds like conversion of branded drugs and lower price generics. Cutthroat competition in the MedTech space adds to woes. 
 

Zacks Rank
 

Currently, AmerisourceBergen carries a Zacks Rank #3 (Hold). 
 

Earnings of MedTech Majors at a Glance
 

Some better-ranked stocks which posted solid results this earning season are Stryker Corporation SYK, Abbott Laboratories ABT and CONMED Corporation CNMD, each carrying a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Stryker delivered first-quarter 2019 adjusted earnings per share of $1.88, beating the Zacks Consensus Estimate by 2.2%. Revenues of $3.52 billion were in line with the Zacks Consensus Estimate.

 

Abbott reported first-quarter 2019 adjusted earnings of 63 cents per share, beating the Zacks Consensus Estimate by 3.3%. First-quarter worldwide sales came in at $7.54 billion, above the Zacks Consensus Estimate of $7.47 billion.
 

CONMED posted first-quarter 2019 adjusted earnings per share of 57 cents, which beat the Zacks Consensus Estimate of 54 cents. Revenues were $218.4 million, surpassing the Zacks Consensus Estimate of $213 million.

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