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AmerisourceBergen (ABC) Q3 Earnings & Revenues Top Estimates

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Zacks Equity Research
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AmerisourceBergen Corporation ABC reported third-quarter fiscal 2020 adjusted earnings per share (EPS) of $1.85 surpassing the Zacks Consensus Estimate of $1.58 by 17.1%. The bottom line also improved 5.1% year over year.

The better-than-expected bottom-line performance can be attributed to lower adjusted effective tax rate and reduced share count.

Revenues increased 0.3% to $45.37 billion in the reported quarter. Further, the top line outpaced the Zacks Consensus Estimate by 1.4%.

Segmental Analysis

Pharmaceutical Distribution Segment

Revenues at this segment totaled $43.58 billion, inching up 0.1% on a year-over-year basis. Owing to the onset of the COVID-19 pandemic, many of the company’s customers ramped up their purchases in first-quarter 2020 that led to fewer purchases in the second quarter. This led to marginal improvement in the segment’s revenues.

Segmental operating income was $426.6 million, up 3.6% year over year. Increase in gross profit and decrease in operating expenses drove the upside.

AmerisourceBergen Corporation Price, Consensus and EPS Surprise

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

AmerisourceBergen Corporation price-consensus-eps-surprise-chart | AmerisourceBergen Corporation Quote

Other Segment

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

Revenues at this segment were $1.81 billion, up 4.4% year over year. This upside was driven by growth across two operating segments — ABCS and World Courier.

Operating income in the segment was $82.9 million in the quarter, down 12.9% year over year primarily due to the impact of the pandemic at MWI.

Margin Analysis

In the quarter under review, AmerisourceBergen reported adjusted gross profit of $1.23 billion, up 0.2% on a year-over-year basis. As a percentage of revenues, adjusted gross margin was 2.7% in the quarter, which remained flat on a year-over-year basis.

The company reported adjusted operating income of $507.5 million, up 0.2% year over year. As a percentage of revenues, adjusted operating margin was 1.1% in the quarter, which remained flat from the prior-year quarter.

Fiscal 2020 Guidance Updated

AmerisourceBergen has updated fiscal year 2020 outlook, reflecting its sustained robust performance and strong execution.

Adjusted EPS is now estimated in the range of $7.80-$7.95 (up from the previously guided range of $7.35-$7.65). The Zacks Consensus Estimate is currently pegged at $7.40.

The company estimates revenue growth in the mid-single-digit percent range (up from the previously guided range of low-to-mid-single-digit percent range).

Adjusted operating income is now projected to grow in the mid-to-high-single-digit percent range (up from the previously guided low-to mid-single-digit percent range).

Operating income at Pharmaceutical Distribution Services segment is now anticipated to improve in the mid-to-high-single-digit percent range (up from the low-to mid-single-digit percent range).

For the Other segment the metric is estimated to grow in the low-single-digit percent range (up from the operating income decline in the low-single-digit percent rage).

Nonetheless, the company has reaffirmed all the other previously communicated aspects of its fiscal 2020 guidance and assumptions, which are as follows:

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

The company anticipates adjusted effective tax rate to be around 21% (down from the prior guided range of 21-22%).

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

Further, the company now anticipates weighted average diluted shares to range between 206 million and 207 million.

Summing Up

AmerisourceBergen exited the fiscal third quarter on a strong note, wherein both earnings and revenues beat the consensus mark. The company continues to gain from its Pharmaceutical segment and World Courier business, which have been generating substantial profits for quite some time. Moreover, the company witnessed lower operating expenses and increase in gross profit in the quarter under review.

Meanwhile, both gross and operating margins remained flat compared with the prior-year quarter. Notably, the company faces other headwinds like conversion of branded drugs and lower price generics. Cut-throat competition in the MedTech space also remains a concern.

Zacks Rank

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

Key Picks

Some better-ranked stocks in the broader medical space are Thermo Fisher Scientific Inc. TMO, PerkinElmer, Inc. PKI and West Pharmaceutical Services, Inc. WST. While both PerkinElmer and West Pharmaceuticals sport a Zacks Rank #1 (Strong Buy), Thermo Fisher carries a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Thermo Fisher reported second-quarter 2020 adjusted EPS of $3.89, beating the Zacks Consensus Estimate by 45.7%. Revenues of $6.92 billion outpaced the consensus mark by 0.1%.

PerkinElmer reported second-quarter 2020 adjusted EPS of $1.57, surpassing the Zacks Consensus Estimate by 68.8%. Revenues of $811.7 million outpaced the consensus mark by 1.3%.

West Pharmaceuticals reported second-quarter 2020 adjusted EPS of $1.25, outpacing the Zacks Consensus Estimate of 91 cents. Revenues of $527.2 million surpassed the consensus estimate by 6.9%.

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AmerisourceBergen Corporation (ABC) : Free Stock Analysis Report
 
PerkinElmer, Inc. (PKI) : Free Stock Analysis Report
 
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